Preparing for an ‘earlier’ retirement requires making sure our money lasts. Having various ‘buckets’ of resources is how we won’t lose our minds when the stock market takes a bit of a tumble.
Before I begin, if you are worried about your money in the stockmarket, please watch this video. You’ll feel MUCH better.
Buckets 1 & 2 – Our Retirement Accounts
We have amassed, in my opinion, a significant amount in our 401K retirement accounts. I will always be an advocate of the stock market, as it has proven over and over again that it recovers. Slow, steady and consistent investing will give you the money you need over time. We are proof.
We have two retirement accounts, and consider them buckets 1 & 2.
The first bucket will have ultraconservative investments, and we will use it to get through the first 7 years of retirement.
The second bucket will be money we will let grow. We figure we have another 12 years of growth.
Bucket 3: CASH.
My goal before we retire is to have $200,000 – $250,000 in cash reserves. I believe this will be enough for us to weather a long down market.
Our cash goal is a lofty one, but one we could do. Thanks to my husband’s career, the fact that he was never unemployed, and his hard work to get to the position he’s in, we are now able to bank 50% of his take home salary. (Of course it doesn’t hurt that all four kiddos are off Mom & Dad’s payroll!). If I’m diligent with our budget, this goal can be obtained in three years. I will take the fourth year to pay off our mortgage, which is the only way my conservative husband will retire. 😉
Bucket 4: Social Security
Of course, we will have social security (yes.we.will). We won’t start receiving it until year 7 of our retirement. (I’ll receive mine two years before hubby). If we keep our expenses low, it will cover 3/4 of our monthly expenses.
Bucket 5: A Divorce Settlement Pension (My HealthCare Plan)
May I just say I earned every penny of this? For all those that may not know, I was married and divorced in my 20’s. I will never go into the specifics of that, but I came out ahead with two GORGEOUS daughters and a pension. I will receive the pension at age 62 (the same year my husband plans to retire). I will take it as a lump sum, then roll it into an IRA. This should cover most of our healthcare needs before medicare kicks in.
I believe it’s imperative to have several ways to get money in retirement, and cash will play an even more important roll in the future.
How are you saving for retirement? Or, how are you spending in retirement? Please share in the comments.
JOURNEY TO RETIREMENT 
We are also older (62/69). We did the 50% save while he was 60-64 and paid off the house. Hubby’s parents lived into their late 80’s and my mom turns 90 this year. We have no where $$ what you will have- but it works for us. Good friends (60/60) self fund, live well, travel tons, and has a bunch more $ for retirement. It is all good!
We dropped your bucket one(and our financial advisor) just before the last bust.
Our buckets: (1,2,3 are in IRAs)1. Cash/CD 2. Bonds (10%) 3. Stocks(10%) Yes, once burned twice shy….4. Military pension (which we live almost exclusively on) 5. Social Security 6. Small inheritance (invested well long ago)used for family travel/ grandchildren school.
Hubby’s IRAs have all been converted to Roth. A tiny TSP RMD begins in 18 months. My IRAs are about 50Roth-50Traditional. When I hit 65 (gulp) my tiny pensions will be enough to pay for my Medicare premiums. 66 I begin SS. My RMD at 72 (as of now). One thing I did not know- federal government taxes 80% of our SS if we make ” too much”/which we do (so it ain’t much).
We know we are in one of the two sweet spots of IRA conversion (before his SS and now before mine). Still, paying taxes on that money is a hard gulp. Better now then who knows what later?
You might take a hard look at that when your dh retires, but before SS/pensions kick in.
If the administration changes we may sell and move West before taxes become unpredictable. Otherwise we will be in Delaware for my son’s “military tour” and then out West ‘tll we are no more….. (or my daughter insists that we move close again).
Any ideas that would make it better? I am glad to have someone to bounce it off of. Glad you didn’t leave!
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I don’t have the fear of the market, so that is different. It would cost us too much to convert all of our traditional savings to Roths, although I’m telling my children to only do Roths. They are a sweet deal. I was assuming 100% of our social security would be taxed, so that’s actually better in my calculations. We hope to ‘live well, travel tons” too! lol. We intend on doing most of that in the beginning while we can still walk. lol. You seem to have a very good handle on everything, I don’t see anything to change. I have no doubt our administration will stay the same. Have you seen the candidates? Good grief.
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Sounds like you have a great plan. I’d like to have some cash reserves before DH retires, but it will be nowhere near yours unless a rich aunt leaves us her estate! We will have a decent 401k balance, Social Security, and a nice pension. And I may decide to keep working part time for a few years. That’s yet to be determined. The plan is to leave the 401k alone and see if we can get along without it until we are forced to make withdrawals. That will hopefully give it time to grow even more after retirement. … And I tend to agree with your assessment of the upcoming election. I’m still waiting for a decent candidate to emerge.
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Thanks Sarah. Having a pension is a big win, great news for you! 🙂 Part time work can be a blessing — keeping active is key in retirement. 🙂
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