NEW VERSION OF THE FINANCE-BUCKET PLAN

Jan 13th, 2012 | By Sharon Shaw Elrod MSW EdD | Category: Senior Finances

40-Year Old Plan Has a Comeback

Retirees and Baby Boomers that we hear from continue to struggle with finances. We senior citizens are not in the 1% of wealth Americans; we’re in the 99%.  We want assurances that our retirement money will outlive us, and that is hard to come by.  However, there is another notion being utilized in a lot of quarters these days that hold some promise that it just might work to keep our money working for us as long as we live.

Back in the 1970s when interest rates on short-term investments were in the clouds, a three-bucket plan for retirement investment was conceived.  SCJ could not find where it originated, but if and when we do, we will give appropriate credit.

In the three-bucket plan, retirees and pre-retirees divide their savings/investments into three categories that are specifically designed to produce income at different times in retirement.

  • The first bucket is for bank CDs and liquid savings–savings that are considered the safest of all.  You can draw down this money to zero before you have to begin using your stocks and bonds.  This pot of money is for immediate income, up to ten years.
  • The second is for bonds that are considered safe; it is intended to fund retirement for years 10 through 20.
  • The third bucket is for growth.  You invest money in riskier assets like stocks, real estate and gold.  This money is intended to be used after you have been retired 20 years.

How Do I Get More Information about the Bucket Plan?

The first question you probably have is this:  Just how much money needs to go into each bucket?  That’s where your trusted financial planner enters the room.  If you want to consider this kind of plan, do your research first. You can find a description with examples in the December 2011/January 2012 issue of AARP The MagazineBe sure you understand how the system works, and how much money (percentages of your total available) needs to go into each bucket.

Then, as always, take your information, notes and questions to your trusted financial adviser and have a talk.  Listen to her/his counsel; evaluate the pros and cons; thoughtfully consider all the information, and then make your decision about whether or not the Finance Bucket Plan is right for you.



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