Bucket Investment planning is key to financial management.
Bucket Investment Planning is a strategic approach to managing one’s investments, designed to achieve specific financial goals while minimizing risk. The concept involves dividing your investment portfolio into different “buckets,” each earmarked for a different purpose or time horizon. Typically, these buckets represent different levels of risk and liquidity. For instance, a short-term bucket may contain cash or highly liquid assets for immediate needs, while a long-term bucket might comprise growth-oriented investments like stocks or real estate. By structuring investments in this way, investors can balance the need for current income with long-term growth objectives, providing both stability and opportunity in their financial planning.
Here are some insight on how we use bucket planning for our clients here at The Retirement Solution.
Bucketing Strategy Overview
Our bucketing strategy divides retirement assets into distinct buckets to address different phases of retirement:
- Bucket A (Years 1-5): This focuses on meeting immediate expenses during the early years of retirement, prioritizing liquidity, and safety.
- Buckets B (Years 5-10): Utilizing Equity Indexed Accounts (EIAs), like a CD with 5-year and 10-year terms, providing principal protection and growth potential for wealth accumulation and income generation.
- Bucket C: (Years 10-20): This investment follows the same pattern of maturity as Buckets B and but for a longer term and at a higher rate of return, allowing for continued growth potential and income generation in later years.
- Bucket G (Years 20+) Market Account: This is invested in the stock market for growth potential and capital appreciation to supplement retirement income.
Risk Management and Portfolio Diversification
By allocating principal-protected assets to Buckets B and C, we can invest more aggressively in Bucket G, for diversification and effective risk management across the entire retirement portfolio.
Rebalancing and Longevity Concerns
It is important to reassess every year with the changing market. Regularly review and adjust the retirement income plan based on changing income needs, longevity concerns, and market conditions. This ensures alignment with your retirement goals and financial stability throughout retirement.
Conclusion
A diversified portfolio strategy provides a disciplined approach to managing retirement income. By incorporating Equity Indexed Accounts (EIAs) into our retirement income planning process, we aim to optimize cash flow, achieve long-term wealth accumulation goals, and mitigate risk while preserving capital.
If you’re ready to explore how bucket planning can enhance your retirement income, contact us today to schedule a consultation. Let us help you navigate retirement with confidence.
Investment advisory services and insurance services are provided through The Retirement Solution LLC, a Registered Investment Advisor.
The general views outlined in this material are those of The Retirement Solution LLC and should not be construed as individualized or personalized investment advice. The information presented is for educational purposes only developed from sources believed to be providing accurate information. It is not intended to make an offer or solicitation for the sale or purchase of any specific products, services, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Insurance and Annuity product guarantees are subject to the claims-paying ability of the issuing company. To comply with IRS Regulations, we are informing you of the following: Any discussion or advice regarding tax issues contained in this video presentation was not intended or written to be used, and cannot be used, to avoid taxpayer penalties. Anyone viewing this presentation or contemplating a transaction discussed in this material should seek advice based on your circumstances from an independent tax advisor. Information is not intended to provide specific legal or tax advice.
The information in this material is not intended as tax or legal advice. Be sure to first consult with a qualified financial adviser, tax professional, or attorney before implementing any strategy or recommendation discussed.