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

Our retirement income strategy.

Photo by Kristina Paukshtite on Pexels.com

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.

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.

Photo by Oleksandr Pidvalnyi on Pexels.com

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?

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.

Photo by Tima Miroshnichenko on Pexels.com

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?

Deployment, Living for TODAY, Positivity, Retirement Journey

An August update.

Photo by le vy on Pexels.com

I can’t believe a whole month has passed since I’ve posted. I thought August would be a financially quiet month, but alas it was filled with spending – lots of spending – albeit the good kind!

Here’s the breakdown:

  • I booked and paid for a cruise for January with my daughter;
  • I paid extra on our mortgage as we are trying to pay it off as quickly as possible;
  • I purchased a few more items for our Europe trip in a couple of weeks; and
  • At the last minute, my husband and I decided we wanted to surprise our son at the pier when his ship pulls in after a 7-month deployment in a week, so we paid for a flight, hotel, and car rental. I.can’t.wait. 😉

To say I spent a lot of money last month is an understatement, but I must say it was all worth it! I truly have not added it up this time. (Perhaps I don’t wan’t to know….)

Even with all of that spending, our networth managed to increase from July by $27,000 (mostly from investments) . We are still on track to retire on time. 🙂

How was your August?

Goal Setting, Positivity, Retirement Journey, Spending

A July Challenge Update….a little late.

Photo by Jorge Urosa on Pexels.com

I apologize for this late update, a lot of unexpected stuff came up and my blog fell to the wayside. I closed out July on Saturday, and thankfully it wasn’t as bad as I thought. Spoiler alert: I did not meet my challenge goal.

Let’s just get right to the numbers–

July’s spending:

  • Groceries/Eating Out: $623.00
  • Personal Care: $182.00
  • OTC/Medical: $74.00
  • Clothes & Accessories: $395.00 (hubby bought a few items too!)
  • Gasoline: $32.00
  • Gifts/Spontaneous giving: $352.00
  • Mom &Dad: $80.00
  • Pet: $66.00 (dog food and misc. accessories)
  • Travel (road trips and misc. travel products): $665.00

Total: $2,117.00

I was $1,367 over my goal of $750.00. I can honestly say I do not regret any of the spending. After analyzing the different categories and amounts, I realized that at least $1,000 of the $1,367 overage was for my trip to Italy this September. Planning this trip has sparked so much joy, that I’m not the least bit discouraged from failing this challenge. I’m actually energized and excited for more opportunities to travel, especially in retirement. 🙂

I know some of you were doing the challenge with me, and have been successful! Congrats! Please let me know what you are going to do with all that extra money you saved!

How was July for you?