Aim for 6 retirement goals with 3 simple buckets


When it comes to preparing for retirement, people tend to think of their portfolio assets as pieces of a puzzle.

However, they do not necessarily have a plan to put these parts together; in other words, how to best use their various investments or sources of income. They often buy what they like, do what they are told, take what they are given and hope for the best.

From my years of working with retirees and pre-retirees, I find that there are generally six things people want their money to do for them during retirement:

  1. Supply income
  2. Access growth
  3. Provide liquidity
  4. Avoid paying unnecessary taxes
  5. Provide security
  6. Create an inheritance

When I meet clients and potential clients, our first step is always to identify and prioritize these priorities. This way we can build a plan around their specific needs and goals. We do this often by talking about thinking in terms of three “buckets of money” – each bucket fulfilling a different need in retirement:

  1. Returned
  2. Growth
  3. Heritage

Using this three-pronged approach can help you be better positioned to make precise investment choices and changes to ensure you get the retirement you’ve worked for your whole life.

The income bucket

This bucket may be the most important of the three. It’s the bucket that’s going to pay your bills, so it’s imperative to have solid accounting of all your sources of income – social security, maybe a pension, your savings and investments – and know when you’re counting. tap into each of them. It’s also important to consider how secure these sources are and whether they will provide the income your family will need throughout your retirement years.

Those who still have pensions may find that their defined benefit plans are not perfect, for example. Many private plans do not have an inflation adjustment, so an amount that looks good today may not be as good 20 years after retirement. And the benefits don’t always extend beyond the life of an employee or, in some cases, the life of a spouse. This means that the heirs will not be able to rely on this money unless it is redirected to something that they can inherit.

Social security plays a vital role in your retirement and your lifestyle. Although Social Security offers cost of living adjustments (COLA), they are not guaranteed to occur every year. When a spouse dies, the lower of the couple’s two checks disappears. And because your Social Security benefits aren’t part of your estate, they’re not automatically passed on to your children as part of their inheritance (unless they’re eligible for survivor benefits).

It is also possible that social security benefits will be reduced in the future. As early as next year, Social Security’s annual spending could exceed its income, forcing the program to start tapping into its trust funds. The expected impact could mean that only 80% of promised benefits would actually be paid from 2035, according to the 2019 annual report of the board of directors of the federal old age and survivors’ and federal disability insurance trust funds.

The uncertainty of these two sources of income – or worries about a shortfall in what you will have in guaranteed income compared to what you will need – could mean it’s time to consider. annuities as a possible source of income, something that is secure and can provide guaranteed income for life for you and your spouse.

I know there are different opinions about annuities, and I’m not saying they’re suitable for everyone, but when it comes to providing a secure and guaranteed income, annuities can be a vital part of your income. I believe in fixed and fixed indexed annuities because of their growth potential and the various ways they can provide income for life. Like other investments, most annuities can be passed on to your relatives / heirs. (Make sure you understand the tax and other consequences when doing your estate planning.)

The Growth Bucket

This compartment aims to help your aggregate retirement assets outpace inflation in the long run and can help you deal with longevity risk – the frightening possibility that you or your spouse may run out of money in the future just because you have lived too long.

How much should you put in for growth? One of the basic principles of investing for retirement is to gradually reduce risk as you get older, and a common rule of thumb, the “rule of 100”, can help. The 100 rule states that investors must keep a percentage of shares equal to 100 minus their age. So a 60-year-old woman could have a 40% equity portfolio, while the rest of her assets would be placed in more secure financial vehicles. A 70-year-old man would go to something closer to 30% in stocks, and so on. In retirement, these riskier investments would be in your growth compartment.

Of course, each investor should adjust these numbers according to their needs and tolerance for risk. For some of the families we work with, this may mean putting more assets in their growth compartment where we manage their assets in a diversified portfolio that may include stocks, bonds, mutual funds and other investments. For others who are more averse to risk, we recommend a higher percentage in the income bracket. I use the assets under management through different third party managers (without adding any investor fees).

The heirloom bucket

This sub-fund includes investments and strategies that could help you leave money to your heirs. This usually means buying life insurance, but not necessarily for the traditional reasons.

Most people think of purchasing life insurance to support their families in the event of premature death. But life insurance can also be used to turn heavily taxed assets (including withdrawals from tax-deferred retirement accounts, which are treated as ordinary income) into assets that will not be taxed. Life insurance allows policyholders to save tax-free; it allows their heirs to access their death benefit tax-free; and now that the new hybrid products include a long-term care component, they can help retirees cover future healthcare costs, if applicable.

For clients for whom life insurance is not a good choice; whether they are not eligible or for some other reason, we are looking at other tax-efficient strategies for transferring wealth. This can include Roth conversion strategies and other tax-advantaged options.

Many people prioritize accumulating money – or creating their “number” – in the years leading up to retirement. But few seem to be putting so much effort into how they will hold and distribute that money for decades to come, or how they will pass it on to loved ones later.

Turning all the pieces of that puzzle you’ve put together over the years into the retirement image you’ve long been envisioning takes careful planning. Don’t delay and don’t hesitate to seek the help of a financial professional specializing in retirement.

Kim Franke-Folstad contributed to this article.

There are risks involved in investing, including the potential loss of capital. Any reference to protection benefits, safety, security and lifetime income generally refers to fixed insurance products, never to securities or investment products. The guarantees for insurance and annuity products are backed by the financial strength and claims-settling capacity of the issuing insurance company. Neither the firm nor its agents or representatives can give tax or legal advice. Individuals should consult a qualified professional for advice before making any purchasing decision. Journey Wealth Management is not affiliated with the US government or any government agency.

President and CEO, Journey Wealth Management LLC

Roy Gagaza is President and CEO of Journey Wealth Management LLC ( He has 21 years of experience in the financial services industry, served as an officer in the military for 20 years, and holds a bachelor’s degree from San Jose State University.

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