Family Wealth blog

Since the film “The Bucket List” first hit theaters in 1999, people have had a handy term for thinking about the can’t miss experiences they want to have in life. Well, it turns out there’s another kind of bucket list that should help make your bucket list easier to turn into reality. It’s called the Retirement Bucket Strategy. In this list, there are only three buckets, but they are all very important.

This investment strategy involves dividing your sources of income into three buckets: immediate, intermediate, and long-term, each with its own specific purpose based on when the money will be needed. By doing so, you can better optimize your investments, minimize financial risk and, if all goes well, have the means throughout retirement to actually do those things on your much longer bucket list. And since the average retirement now stretches to thirty years, you’ll want to make sure your buckets are as big as possible!

The Immediate (Short-term) Bucket

The Intermediate Bucket is designed to provide income and growth for the five to fifteen retirement years after your Immediate bucket term. This bucket should be composed of more conservative investments, with an emphasis on growth stocks and especially dividend-paying stocks. These offer a balance of income and potential capital appreciation. The assets in this bucket are intended to be less volatile than those in the long-term bucket but still provide higher returns than the short-term bucket. As in the Immediate Bucket, keeping sufficient cash and cash equivalents available will remain important for weathering the occasional stretch of market volatility. This Intermediate Bucket strategy allows you to maintain a comfortable lifestyle while keeping up with inflation and preserving your wealth.

The Intermediate Bucket

The Intermediate Bucket is designed to provide income and growth for the five to fifteen retirement years after your Immediate bucket term. This bucket should be composed of more conservative investments, such as bonds or dividend-paying stocks. These offer a balance of income and potential capital appreciation. The assets in this bucket are intended to be less volatile than those in the long-term bucket but still provide higher returns than the short-term bucket. This strategy allows you to maintain a comfortable lifestyle while keeping up with inflation and preserving your wealth.

The Long-term Bucket

The Long-term Bucket is meant to generate growth and income for the later years of your retirement. As noted, today’s retirements last a lot longer than those of earlier generations. So, the good news is you can plan on a lot more time for working on your bucket list. The other news is that you’ll want to do everything in this Retirement Bucket Strategy to increase you chances for funding all of it.

Now, your Long-term Bucket should hold more aggressive investments, such as stocks, mutual funds, or exchange-traded funds (ETFs), all of which have higher growth potential—but also come with increased volatility. By allocating a portion of your portfolio to these growth-oriented investments, you can counteract the effects of inflation so that your retirement savings have the best chance of lasting throughout your lifetime.

The Takeaway

The Retirement Bucket Strategy is a practical and effective approach to managing your retirement finances. It’s designed to help you optimize your investments, minimize financial risk, and enjoy a prosperous retirement. By segregating your sources of income into Immediate, Intermediate, and Long-term buckets,

you can better orient your retirement finances toward a comfortable and stress-free transition into and throughout your golden years.

Remember review your retirement plan on a regular basis and adjust your buckets as needed. This will help ensure that your asset allocation remains aligned with your changing financial needs. With careful planning, preparation, and the guidance of a financial advisor, you can build your real bucket list and plan for those special experiences with a lot more confidence.

Source:

Understanding the Retirement Bucket Strategy; Copyright © 2023 FMeX.  

Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice. J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at jlbainbridge.com and https://adviserinfo.sec.gov/firm/summary/108058.

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