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.

Nine months and counting!!

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We are now only nine months away from my husband retiring! This morning’s money meeting clinched the deal. Although the stock market has been taking a hit, and it seems like a disaster, there is a bright side! Interest rates for secure savings accounts are finally increasing!!

How will we manage our money?

For the first 5 years of retirement (just before taking social security), we will be utilizing laddered CDs for our living expenses. Fidelity has some high-yield laddering CDs, and I intend to take full advantage of the 5-year ladder plan within the next couple of months. We have recently taken advantage of I Bonds, which are presently yielding 9.62%. You can learn more about them here. I also moved some of our savings into other 12-month CDs that are getting 1.75% – 2%. (I know this isn’t keeping up with present inflation, but it’s much better than the .1% they had been offering). I’m keeping 9 months of living expenses in cash at Ally Bank which is finally earning at least 1%.

Why retire in 9 months and not now?

Although we could feasibly retire at any time, nine months will give us the time needed to get all of our accounts in order. During that time, my husband’s company will be adding 7.5% of his income into retirement investments, we will cap off our Health Savings Account and add more money to our liquid savings accounts. (Nothing wrong with some extra cash, right?) 🙂

It feels so much better knowing that we will have our living expenses in safe accounts, backed by the FDIC, and not holding our breath each month while the market takes its wild ride. (I’ve never been a fan of roller coasters. 😉 ) We can actually relax. We will still have a significant portion of our nest egg in investments, but since we won’t have to touch those for another 10 years, it will have the necessary time to grow.

Anyone else taking advantage of I Bonds or laddering CDs?

Plans are changing. A retirement update.

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In a past blog post, I listed how we planned on retiring in 2023, even with inflation looming. If you missed it and want to know how we thought we were going to do it, you can read it here.

Fast forward 2 short months. A lot has changed, and most of the changes have been out of our control.

1. Our retirement nest egg: i.e. the stock market.

Since January 1st, we have lost 15% of our retirement portfolio. The stock market has gone up and down so much it rivals the Yukon Striker! For all intents and purposes, that loss equates to three years of living expenses. Because my husband is so ‘young’, we wouldn’t be able to access social security for at least seven years, so our portfolio and personal savings is what we had hoped to draw from when we retired.

2. Selling our home and moving. Our original plan was to sell our home and buy another, smaller home without a mortgage. Since we still have a small mortgage on our current home, this would allow us to be not only mortgage-free but give us some extra cash. Our home’s value has gone up 17%, but we believe finding another home would be difficult. Real estate values have exploded, and homes are going very fast BUT for way more money than they are worth. I refuse to play that game. 2006 – 2009 was not that long ago. 😉 Florida was once on our possible relocation list, but the overpriced real estate and the problems with homeowner’s insurance are making us rethink this possibility. At least for now.

3. Cash Savings. This is one thing that is in our control. My husband is still working, and will continue to do so if the market continues to be a bear. In the meantime, we are on schedule to put a year’s worth of expenses away by the end of the year. If we decide another year of work is necessary, we will continue to put cash away as well as pay off our mortgage in full.

Sometimes unforeseen circumstances require a change of plans. We are adapting to these changes – even though they may require a change in our retirement date. However, we still believe our retirement is right around the corner, and are looking forward to a new adventure.

If you are retired, or are planning on being retired in the near future, how has the present financial environment changed your plans?

MY NO/LOW BUY YEAR CHALLENGE.

Via

It’s the beginning of a new year (and hopefully the last year before my husband’s retirement!) and I’ve decided to embark on my biggest challenge yet! For 2022, I’ve decided to stop shopping. A No Buy/Low Buy year, if you will. I will still buy groceries, of course, and household items, pay my bills and take care of my health. I will put gas in my car, and buy birthday presents. However, I won’t be buying things that I don’t truly need.

My number one reason for this year-long challenge is to save as much money as possible to add to our cash stash. We have the means to retire today but we would like to have at least two years’ worth of expenses in a cash/non-retirement investment form. I am confident that if I stick to this challenge, we will achieve that goal by December 2022. My second reason, and probably more important than the first, is to curb my impulsive spending on stuff that I just don’t need.

Here are the general guidelines I will be following for this challenge:

• Follow my buying/no buying lists (see below) with no exceptions.
• USE cash when in stores.
• LIMIT and/or AVOID online purchases, especially AMAZON.
• UNSUBSCRIBE to store emails and social media that encourages spending.
• KEEP track via WISHLIST of what I would have purchased if I wasn’t on this challenge.
• WAIT 24 hours before making an INTENTIONAL purchase for items I am allowed to purchase.
• REQUEST ‘use up’ or experiences as gifts for myself instead of stuff.
• GIFT giving is fine, but I must stay within the budget I’ve set.
• FIND a support system. (I’m counting on my readers to keep me in line!)

THINGS I WILL BE SPENDING MONEY ON (Low Buy)

• Basic Bills (mortgage, utilities, cell phone,internet, insurance and taxes)
• Subscriptions
• Health care costs
• Groceries, gas
• Replacements (only) for clothes, make up, personal care items, household items that wear out or run out
• Haircuts and color treatments
• Gifts/Charitable contributions
• Home/Car maintenance
• Eating out occasionally
• Pet food/Vet
• Experiences/Outings
• Educational courses
• Travel that has already been planned

THINGS I WON’T BE SPENDING MONEY ON (No buy)

• Home Improvements
• Home Decor/Seasonal Decor
• Furniture
• Clothes, outerwear and shoes (unless it is a replacement)
• Planner supplies: planners, pens, markers, stickers, etc.
• Purses, wallets, jewelry
• Travel luggage, bags, accessories
• Books, apps
• Subscriptions boxes (any)
• Perfume, extra make up
• Excessive gift giving
• Nail salon visits
• Miscellaneous and unnecessary dog items (yeah, this needs to be listed)
• New cruise/travel bookings

I may be speaking too soon, but I don’t think this will be as daunting as it seems. I have more than enough of the items that are listed on the “do not buy” side, so I doubt I’ll even miss anything. Most of the purchasing and spending I’ve been doing has been impulsive, mainly from advertisements and social media influencers. And that type of shopping has to stop altogether, not just for this challenge. I’ll be keeping track of the items that I almost bought, so I can also keep track of how much I saved by not buying them.

I will do weekly updates, monthly updates, and quarterly updates on this blog to keep myself accountable. I hope you’ll follow along and keep me accountable too!

Next up? My yearly budget plan.

Anyone else curbing their spending this year?

Happy New Year! Welcome to my new blog.

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Happy New Year! May 2022 bring only good things to you and yours!!

2021 was a pretty good year for me. There were many blessings to be counted. There were also some misfortunes (getting Covid and breaking my foot). However, even with those two health snags, I still had a good year.

My blog went silent for a while, a long while…. because I made the mistake of canceling the ‘business’ membership of this blog and the whole site crashed. I was so discouraged, I walked away from it for a while. I’ve decided to give it another go, but this time as a countdown to our full retirement. I’m excited to document this, as I believe it will be helpful for anyone else getting ready to retire. We are exactly one year away from this accomplishment! As exciting as that is, we still have some work to do. This space will focus on how we will be preparing for a life with no more paychecks.

First up will be a year-long Low/No Buy challenge. Yes, I know, I’ve tried this before and failed. However, I really never had a good enough WHY. I do now. We want to have at least 24 months of living expenses in cash savings. We also want to downsize our home and buying more crap would make that very difficult. I’ve been intrigued by those who have actually accomplished this challenge and felt that at this point in my life (children out of the house) I have half a chance at succeeding. My next post will outline the guidelines and rules.

I hope you will join me as I embark on this new blog and challenge. I look forward to hearing your thoughts in the comments!