If you’re retired, or close to it, you’ve probably asked yourself this question: “Where should I actually put my money?”
Cash feels safe, but let’s be honest, it doesn’t earn much. The market has more growth potential, but the ups and downs? That can be stressful when you’re no longer working.
That’s why I like to use the three-bucket strategy. It’s a simple way to organize your money, so you know what’s for now, what’s for later, and what’s working behind the scenes.
Watch this short video to learn more about the 3-bucket retirement strategy. If you have any questions, reach out today for a free financial coaching session.
Transcript
Hi, I’m Brent with Scottsdale Wealth Advisory. I want to talk to you about how to organize your retirement money without feeling overwhelmed.
If you’re retired or close to it, you’ve probably asked yourself this question: “Where should I actually put my money?”
Cash feels safe, but let’s be honest, after inflation and taxes, it’s at a loss. The market has growth potential, but the ups and downs, that can be stressful when you’re no longer working and earning a paycheck.
That’s why I like to use a three-bucket strategy. It’s a simple way to organize your money so you know what’s for now, what’s for later, and what’s working behind the scenes.
Bucket 1: Short-Term Cash Reserve for Retirement Expenses and Emergencies
Think of your retirement savings as being divided into three buckets. Bucket #1 is short-term, readily available money. This is your “sleep well at night” bucket. It’s the money you keep in the bank account for everyday expenses, emergencies, and near-term spending. Things like groceries, car repairs, a vacation you’re planning, or just peace of mind.
Most people keep 6 to 12 months of living expenses here, sometimes more, depending on their comfort level. This bucket isn’t going to make you rich, but it keeps you calm when markets are unpredictable.
Bucket 2: Retirement Income Bucket for Predictable Cash Flow (Bonds, CDs, Annuities)
Bucket #2 is your income bucket. This is where you build a steady paycheck in retirement. Think of bonds, CDs, and in many cases, annuities. Especially when you want predictable income that doesn’t depend on the stock market. The goal here is simple: you need to generate consistent cash flow to cover the next 5 to 10 years of retirement expenses. That way, you’re not forced to sell investments during a downturn just to pay the bills.
Bucket 3: Long-Term Growth Investments in Retirement (Stocks, ETFs) to Address Inflation
And finally, Bucket #3 is for long-term growth. This is the money you don’t need to touch for a while. It might be invested in stocks, ETFs, or other growth-focused assets. Now, even though you’re retired, your retirement could last 20, 30 years, maybe more. So you still need a portion of your money working for you, growing over time, and helping offset the impact of inflation.
Retirement Planning Structure: Reducing Stress With a Clear Bucket Plan
When your money is organized into these three buckets, everything starts to feel more manageable. You know what’s safe and available, what’s generating income, and what’s growing for the future. It helps take the emotion out of investing and bring structure to your retirement plan.
If you’re wondering how much money you should have in each bucket, or whether your current setup still fits your stage of life, be sure to watch the next videos in this series. And if you still have questions, reach out to schedule a free financial coaching session. Thanks for watching.
