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Unfortunately, many individuals haven't saved enough for retirement. As they approach that milestone, they might start to worry about having enough to last through the years. If this sounds like a concern, consider using the 'bucket' strategy.
This method allows your money to remain invested and grow while ensuring you have enough to cover necessary expenses. According to GOBankingRates:
Organize your savings into buckets for different short- and long-term goals, including everyday living costs, immediate needs, and emergencies," says Fidelity Investments. For daily expenses, keep cash on hand for groceries, utilities, bills, and other essentials. For short-term objectives that aren't urgent, consider time-sensitive investments like CDs.
Morningstar expands on this concept. The first bucket is designated for short-term expenses and should be composed of easily accessible cash. They recommend keeping enough to cover two years' worth of costs here. The second bucket, meant for medium-term withdrawals, should consist of bonds and balanced funds—or as GOBankingRates suggests, CDs. Lastly, the third bucket, for long-term withdrawals, should include stocks and higher-risk bonds.
This approach essentially allows you to keep saving for retirement even after you’ve retired. There’s a lot more involved, so it’s definitely worth discussing further with a financial planner. You’ll need to adjust your buckets based on your personal situation, savings, and risk tolerance.
Naturally, having an emergency fund is crucial for covering unforeseen costs. Additionally, GOBankingRates suggests setting up a health savings account for medical expenses. Be sure to check out their full article for more information on this subject.
Photo by Sherman Geronimo-Tan.
