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Understanding the bucket approach to retirement

Thomas  Charla

Posted on January 05, 2023

Thomas Charla is an expert in financial planning and wellness as well as business markets for MassMutual.
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Define the retirement bucket strategy for financial planning in your later years.

List the three retirement buckets that form the heart of the strategy.

Describe the kind of money needs each bucket is intended to cover.

If you view retirement as a short-term state, you may be shortchanging your retirement years. For many retirees, retirement may last 30 years or more. How you manage the money you will need today may be quite different from how you treat the money you’ll need in 20 or 30 years.

“When people hear the words ‘asset allocation,’ they think of it mainly in terms of getting to retirement age,” said Dung Vu, a financial professional with the MassMutual Pacific Coast agency. “But your asset allocation strategy doesn’t end at the start of retirement. It morphs, expands, and needs to be managed all the way through.” (Learn more: Understanding asset allocation)

To fully prepare for all your retirement years, one tactic may be to consider is dividing your assets into three buckets, each representing about 10 years of your potential 30-year retirement. This is the retirement bucket strategy.

1. The Money Now Bucket: This will cover the first 10 years of your retirement, when you’re most likely to lead an active lifestyle. You may want the assets held in this bucket to be accessible—more liquid — so you can take advantage of your newfound freedom to pursue the things you’ve always wanted to do, such as travelling, focusing on favorite pastimes, or new hobbies.

Your asset allocation may follow a conservative approach, with a higher portion of your assets in cash or cash equivalents.

2. The Money Later Bucket: This will hold money you may spend during the second 10 years of retirement, when you begin to slow down and settle into routines closer to home. You may want the assets held in this bucket to provide a targeted return on investments. The income generated from these assets should strive to at least keep pace with inflation.

Your asset allocation may follow a more balanced approach, with a focus on securities that may provide a fixed return and an opportunity for growth.

3. The Money Much Later Bucket: This will hold the money you may spend during the third 10 years of retirement, when you’ll most likely be focused on healthcare needs or providing care for a loved one.

You may want these assets to be growth oriented as you may not need to access them for 10 to 20 years depending on when you retired. Growth of assets over a longer-term period may be critical to be prepared for the often necessary, and ever-increasing, health care expenses associated with living a long life. Your asset allocation may follow a more moderate-to-aggressive investment approach that provides growth, but still gives you peace of mind.

Review your retirement asset allocation strategy to see how you may take these three buckets into account. Some opt to consult a financial professional to assess all the options available and the risks involved with various types of investments and strategies. (Learn more: Protecting yourself against market fluctuations in retirement)

By taking the long view now, you may find yourself on stronger financial footing as you move through each stage of retirement.

Learn more from MassMutual…

How life insurance can help you in your retirement

Retirement savings catch up: 3 moves

Planning for diminished mental capacity as you age



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The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.