For one, people are living longer, and these longer lifespans have created a number of new problems that need to be taken into consideration when planning for retirement. That’s why we created the 3 Bucket Approach.
This bucket holds all the assets you can immediately get your hands on. Examples are checking and savings accounts, the cash in your wallet, and money under the mattress. We recommend keeping enough money to cover at least 3-6 months’ expenses in this bucket to prepare for unexpected costs and emergencies.
The Income Bucket is funded by Social Security, your pension (if you have one), and any other guaranteed income sources. This bucket is one of the most important to keep filled, as it will not only provide your “mailbox money”, but will also help fund your Liquidity Bucket and any items on your retirement bucket list. Don’t depend on Social Security and pensions forever – building your own guaranteed income will help support a more comfortable lifestyle in retirement.
While your second bucket takes care of your income needs, this bucket provides for continuous growth. As they say, don’t carry all your eggs in one basket; this bucket provides diversification and the ability to make your future retirement “inflation-proof.”