Bucket strategy, Cash Savings, Long term care, Medical Expenses, Retirement, Retirement Journey

Our retirement income strategy.

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The retirement bucket strategy divides your retirement income into three buckets: short-term needs, mid-term needs, and long-term needs. The goal is to have your income needs always met, regardless of market volatility.

I’ve always been fascinated with this income strategy, and love the concept. Perhaps it’s because I already have three different retirement brokerage accounts already set up. I love organization, so this fits the bill. (no pun intended. 😉 )

In our first retirement brokerage account (and the lowest amount of money), we recently sold all our stock shares and bought mutual funds. This essentially secured two years’ worth of living expenses for our retirement. We have cash savings (outside retirement) that would fund a year’s worth of expenses, bringing that 3 years’ worth of expenses and shoring up Bucket No. 1. So if my husband should lose his job today, we have three years to figure out what is next without selling stocks in a down market.

Our second retirement account (which is still active via my husband’s employment), would fund years 4-7. We presently have this at medium risk, hoping to have the investments keep up with inflation. Social security would start in year 7, which would take over 50% of our expenses requiring less from our investments.

Our third retirement account (and by far the largest) would have the opportunity to grow over the next 10 years, leaving us with enough income to bring us well into our late 90’s, if we should live so long.

Ultimately, the bucket strategy seems to hedge against market volatility. If there are down years, we have the cash. Should there be a huge gain in the stock market, we would move another three years’ worth of expenses into Bucket One again and start all over. For us, it makes sense.

Based on our current savings and expenses, we could feasibly retire today. However, we still have some kinks to work out. We need to figure out true healthcare costs and coverage before Medicare kicks in so that won’t break the bank or worse lose access to our doctors. We also need to revisit long-term care insurance–this time with personal knowledge of how much nursing home care really costs and the emotional strain it puts on family members when there is no money for a decent place. (More on that to come).

If you are retired, how do you draw on your income each month?

If you want to know more about the three-bucket strategy, I’ve found this article to be helpful.

Cash Savings, Retirement Journey, SAVINGS

Why I’m building up my savings before I pay off my mortgage. The reason may surprise you.

One of our pre-retirement goals was to pay off the house. Now I’m not so sure that is the best financial move for us at this time.

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About a year ago, we refinanced our mortgage when interest rates were very low and secured a 2.25% rate. Of course, back then, the interest on savings accounts was near zero. Fast forward to today. It appears the financial markets have made a 180. Our online bank is now paying 2.5% interest (3.0% if I switch to a CD). So effectively, I am now getting more interest on my savings account than I am paying in mortgage interest. Crazy, right?

In light of that, we have decided to bulk up our savings instead of rapidly paying off our mortgage. It feels right to have more cash available at this time. And, should when the financial markets turn again, we will have the choice of paying off our mortgage with our savings. We are betting, at least for the next couple of years, rates on savings and mortgages will continue to rise, making it more advantageous for us to save cash. Unfortunately, it won’t look good for those wanting to get a mortgage. Currently, my credit union is offering 6.25% for the same mortgage I got last year for 2.25%. Ouch.

The other reason we are holding off paying down the mortgage is that we still want to downsize. We feel having cash on hand would be better than equity tied up in the house.

I feel as though I’ve had to pivot quite a bit from our original plans for retirement. This last year has been a crazy ride. I guess we’ll have to see how this new plan plays out.

Have you made any changes to your financial plans?

Covid-19, Health, Travel

COVID, exactly one year later.

Well, it happened. After my two-week trip to Europe, I came down with Covid two days after returning home. And, strangely enough, it is exactly one year ago to the day when I had Covid the first time.

The symptoms are different this time, which delayed me from taking a Covid test. After a second day of feeling lousy though, and since I had an entire drawer of test kits, I decided to take one. It was positive.

I’m on Day 6 of Covid and am feeling much, much better. The sore throat and coughing have subsided, and I’m left with just a head cold. The warm shower I took this morning took care of the congestion. In fact, if there were no such thing as Covid, I would have thought this to be another virus related ‘cold’ which Tylenol, cough suppressant, and rest would have cleared.

Traveling is not without its health risks, for sure. I’m not sure where I contracted Covid, but between the huge crowds in Italy, the many public (and dirty!) bathrooms I used, and a 10.5-hour sold-out flight (with the added bonus of people hacking), I’m not surprised.

Goal Setting, Positivity, Retirement Journey, Rising Prices

Sometimes plans change.

And in this case, our timeline for retirement. We originally had planned on retiring in early 2023. However, in the course of the last 9 months so much has changed.

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We, like many others, rode the wave of the stock market that was on the rise for the past two years. And in a blink of an eye, two years’ growth was wiped out. We originally had planned to move the money to safer funds but decided to continue to ride the wave instead. We are still far ahead of the game, being that savings rates have been dismal.

History tells us that the market will come back. In the meantime, we have decided to save cash and use some online savings accounts, CDs, and I Bonds, to secure 3 years’ worth of expenses. We also plan to pay off the mortgage within 18 months. That will put us in a much better position if it takes a little longer for our retirement accounts to recover.

However, in order to complete the above plan, we will need to add a year or two to our timeline for retirement. (As you can see from my header, I am no longer putting a definite timeframe on our retirement.)

I know we are fortunate to be able to make that decision. There are retirees out there who don’t have that choice. Hopefully, most of them have secured their savings in safer investments. I know we will start doing that with our investments little by little until we feel secure in the amount we have to live on.

Could we still retire today if we so chose? Yes. But it wouldn’t feel nearly as secure as it did just nine short months ago.

Anyone else holding off their retirement date?

Cruising, International Travel

My first trip to Europe. What did I think?

My husband and I just got back from a 2-week trip to Europe. We started in Barcelona for two nights and hopped on a cruise ship for a 9-night cruise on the Italian Riviera (with port stops in Marseille/Nice France, Portofino, Naples, Sicily, and Rome). Unfortunately because of high winds, we were unable to port in Livorno which meant we missed Florence/Tuscany. 😦

What we saw and experienced was nothing short of amazing. The scenery, architectural masterpieces, and the mind-boggling attention to detail in grand churches literally took our breath away. We enjoyed tasting various foods from each of the three countries –Paella (a rice dish) in Spain, Croissants and various wines including Rose from Provence in France and Homemade Pasta, Chianti and limoncello in Italy! We had beautiful weather for most of the trip and walked nearly 6-8 miles each day at each port stop (which allowed me to eat all the Gelato I wanted!)

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Although we went in the ‘off-season’, Europe, especially Italy, was flooded with tourists. The streets were full of people that appeared to be mostly Americans/Canadians (based on their conversations). It appears we’ve definitely boosted their economy, and they had no shame in charging exorbitant prices on food, hotels and various souveniers. However, what surprised me the most is that the residents of these countries didn’t seem thrilled to have the tourism. In fact, the warm friendly experience I thought I was going to have (especially in Italy), really didn’t happen. I experienced many impatient and rude waiters, tour guides, taxi drivers, and store attendants. Perhaps it was because we were in highly crowded tourist areas, and/or the language barrier as most Europeans did not speak English like I originally thought (and read about). Either way, my conclusion is that people are people, no matter what country they live in. Some are friendly, some are not.

Would we go back? Since we were on a cruise ship for most of the trip and only had time for a small snippet of each area, we thought we might want to return to some of the places we visited. However, after careful contemplation, we decided that we would likely only return to Italy, but not in the same places, and not anytime soon. (Long flights are not fun! 😉 )

If you’ve been to Europe, how was your experience?