Our retirement income strategy.

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WE CHOOSE THE 3 BUCKET STRATEGY

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.

MEMORIAL DAY and a May Budget Update.

Every Monday during 2022, I am posting an update on what I spent for the week (variable spending only) as a way of keeping myself accountable for my impulse spending. Also, to see my true savings, I am tracking items I was tempted to buy but didn’t. 

https://parade.com/1021399/marynliles/memorial-day-quotes/

As the weather changes and there is more sunshine, my mood tends to lighten up. And, invariably, with my happier mood comes more spending.

As we move closer to a retirement date, I find it easier to pay attention to my savings versus my spending. And, as long as I’m meeting my savings goals, I’m free to spend the rest.

And that is what I did in May.

Below are all my variable expense categories. Two of them are unusually high, and one of them was simply out of my control. Can you guess which one that was??

Hint: Auggie.

Below are my variable categories and the amount I spent in each.

• Groceries: $491.52
• Eating Out: $145.12
• Household: $94.41
• Personal Care/Hair: $332.95 (make up purchases, hair cut and color)
• Misc.: $36.72
• Clothes: ($15.92) a RETURN
• Auggie: $755.96 (dogfood, dog sitting and trip to the Vet for a double ear infection.)
• Gasoline $126.55
• Roadtrip to NY: $165.80
• Gifts: $392.19 (includes most of June’s birthdays)
• Charitable/Spontaneous Giving: $158.18
• Mom & Dad: $182.24 (Supplies for my Mom and Dad)
• OTC Meds: $121.92 (Vitamins, pain relievers)
• Medical Expenses: $455.27 (my foot! and some prescriptions)
• Personal Spending: $15.96 (a pen refill)

Total Variable Spending for May: $3,458.87 (this amount must make you feel great about your budget! I aim to please…)

Wow. When you add it all up, it seems like a ridiculous amount to spend. However, when you look closer — everything but the medical expenses, gift categories and pet costs are within a decent range.

I have no problem with gifts and giving. ESPECIALLY when it involves my parents. Vet costs, however, are outrageous. One might want to think twice before getting a pet – the costs could be quite prohibitive to a budget.

Also, sadly, my foot is not healing. The X-rays show the fracture is still not fully healed. There is some bone growth, but not quite enough. Since there is still pain, a surgery may be in my future. Praying that my foot heals before the next visit because surgery is the last thing I want.

As far as our overall savings, our networth went up by $15,000 this month as the markets slightly recovered, I made a huge payment to our mortgage and put more money into our savings accounts.

I anticipate June to be about the same as far as total expenses, however, most of the spending will be in the travel category. ;). I’ll write about our travel plans in another post, as they have a lot to do with future retirement plans. Stay tuned.

Your turn. How was your May? Please share!

The true cost of a broken foot. (It’s not just medical.)

This past November, while walking the dog, I tripped and fell. Unfortunately, I was not only left with a few bumps and bruises, but also a fractured foot. We had just gotten back from a 5-night cruise to the Caribbean for my 60th birthday. It was a trip that was cherished, as we had spent the whole month before housebound recovering from Covid. However, despite having Covid, I was still able to get outside and walk. Breaking my foot, however, left me couch ridden for several weeks.

Eventually, I was getting around using crutches and wearing a boot. But it made doing simple tasks extremely difficult. I wasn’t able to drive a car, go grocery shopping, cook meals, clean the house, walk the dog, or do anything else that required a lot of movement or standing. Thankfully my husband was still working from home several days a week and had picked up a lot of the slack. However, he was extra busy at work, so I needed to find alternative solutions to the jobs I usually did. I ended up hiring a dog walker, ordering Walmart pickup and/or groceries online, ordering take out when my husband didn’t feel like cooking and hired some cleaning help. And the extra costs added up.

(If any of you feel like you don’t contribute to the household because you don’t work outside the home, talk to my husband. He will tell you that you are more valuable than you know. 😉 )

Here is a breakdown of the various expenses I incurred during the last nine weeks.

• Extra medical expenses: walking boot, crutches, scooter: $375.00
• Doctor visits (co-pays): $635.00
• Dog walker: $250.00
• Extra fees, tips by ordering online groceries: $100
• Ordering take-out: $300
• Cleaning services: $800 (1st time cleaning services charge over $500 for a first ‘deep’ clean. I know, ridiculous. And they didn’t even do a good job. No more.)

Total out of pocket costs: $2,460

OUCH.

This was a good exercise in realizing that it’s just not medical bills that you need to worry about when an accident happens. If you are injured and are responsible for specific chores, jobs, etc., you will need to figure out who will do those jobs while you recover, especially if it lasts for more than a couple of days. It only took one silly little trip on the sidewalk and I was out for almost three months. Thankfully I didn’t need surgery, or it would have been longer.

My foot is healing. I’m no longer using crutches or wearing a boot. The pain is still there, especially at night, but it is much better than before. I anticipate I will be doing my own cleaning, cooking and grocery shopping very soon, as well as taking a stroll down the street with the dog. And I can’t wait.