| When planning for retirement, it’s important to keep in mind that not all savings are equal. Depending on how you hold your money (e.g., cash vs. stocks), it can provide you flexibility in the short term, or potential returns for future income. |
| Bucketing your savings is one of the most popular strategies for retirement income planning is to formulate a bucket approach. A bucket approach, also sometimes called a “time segmentation strategy,” establishes “buckets” or accounts for different spending and giving in unique time periods. Money you need in the short term would be held in cash. Money you need a long time from now could be invested in higher risk for higher return opportunities. Here are some buckets to consider: Near-term monetary needs: Two to five years of income would be in cash or cash equivalents. Mid-term income: Your second bucket might have a more mixed investment allocation in things like bonds and CDs or mutual funds. These types of investments can provide some growth. Long-term income: Bucket three can be more heavily invested in funds and stocks, as you won’t have to touch that bucket for at least 10 years. |
| Steady withdrawals in retirement. Taking steady withdrawals is probably the most well-known retirement income strategy. You take your investment portfolio and sell off a fixed withdrawal amount each year to generate retirement income. According to many investment professionals, withdrawing from your total savings at a rate of 4% is one way to hopefully ensure that you will still have money for the remainder of your life. But, it’s not a hard and fast rule. Some argue that 4% is too much, some say it’s too little. And you know what? They’re both right because everyone has different circumstances to consider, and therefore, a different financial scenario — and no one can predict what the stock market will do. It’s important for you to reflect on your wants and needs, both now and in the future, and work toward realistic goals to make those desires a reality. |
Planning for Retirement
