Jim is only 3 weeks away from retiring and wants to know my top tips for someone approaching retirement. If you are on the countdown to retirement, make sure to listen to the listener’s questions to hear what they are.
In the retirement headlines segment, we’ll explore the benefits of using a bucket withdrawal strategy for investments. You may be surprised to hear what the actual benefit of using the bucket strategy is. Listen in to hear what the bucket strategy can do for your retirement.You may be surprised to hear what the actual benefit of using the bucket strategy is. Click To Tweet
Outline of This Episode
- [1:22] Do bucket withdrawal strategies work well in retirement?
- [6:35] 3 Practical tips for someone retiring in 3-5 weeks
What is a bucket strategy?
A bucket strategy is a financial strategy that is used by dividing your money into a few categories to accomplish an important goal.
There are 3 buckets that retirees can use to distribute their retirement savings. The first is a cash bucket which holds enough cash to maintain 2-3 years of living expenses. The 2nd bucket contains bonds to maintain your midterm financial goals, and the third includes stocks and is used for long-term investments.
While it makes sense financially to divide your retirement savings into 3 separate buckets, it may do even more for your peace of mind.While it makes sense financially to divide your retirement savings into 3 separate buckets, it may do even more for your peace of mind. Click To Tweet
Why use a bucket strategy?
Even though the retirement bucket strategy can help you generate a steady income for the rest of your life and provide safeguards against market fluctuations, the bucket approach actually fares no better or worse than other approaches. However, using buckets can help protect users from having to sell when markets are down.
Having a healthy cash cushion in your first bucket prevents you from worrying about where your next retirement paycheck will come from. By using this strategy, retirees are more likely to stick with their investment strategy.
Retirement buckets are simply ways to segment investments over time
Another way to think about the bucket strategy is by referring to it as a time segmentation strategy. Online your portfolio may seem like chaos, with some investments way up, others way down, and some that haven’t moved in years.
Thinking of your IRA as being separated into a few smaller buckets with different time horizons for each bucket is a great way to make sense of your investment plan. That way when you discover that the stock market has taken a sharp downturn you can remember that your stocks are in your 3rd bucket and you have no need to panic and rush to touch them for 10 years or more. This will give you the confidence to stay the course and stick to your investment strategy.Having a plan B will help you recover from getting punched in the face in retirement. Click To Tweet
3 tips for folks 3 weeks away from retirement
- Have a plan B – You will have a better retirement and will be better able to spend your savings with confidence if you have a solid plan B. Mike Tyson once said, “Everyone has a plan until they get punched in the face.” Having a plan B will help you recover from getting punched in the face in retirement.
- Set up a morning routine – Set yourself up for success by creating a daily schedule. The first part of your day is important for your mental health and will set the tone for your day. Listen in to hear which book I recommend for helping you set up a positive morning routine.
- Delete your investment apps – To help break the habit of checking your investments daily delete your investment apps from your phone. Once you enter retirement get into the habit of only checking your investments on your quarterly statements. Checking them daily will only increase your anxiety and could cause you to doubt your retirement plan.
Resources & People Mentioned
- WSJ article – Do ‘Bucket’ Investment Strategies Make Sense in Retirement?
- BOOK – Miracle Morning by Hal Elrod
- Future Self video
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