The 3-bucket approach to saving for retirement

Jun 23, 2014, 4:58 PM

This is the story that YOU wanted to hear us talk about! It received 44 percent of the vote in our Radioactive poll!

PHOENIX — It’s safe to say that money management was much easier back in the day.

According to Fox Business, today’s economy requires retirees to have an income stream for many years to come since a 30-year retirement is common.

One approach to creating a retirement income plan is the three-bucket approach.

The first bucket will be all the cash needed to live for the next two to three years.

It should include monthly expenses such as housing and food, but also have enough in it to cover unexpected illness that would require treatment. That money is set aside in a stable investment like a money market account.

The second bucket should cover the costs of living out years four through 10; it’s during this period that investments should be focused largely on bonds.

The third bucket, which covers years 11, and on should be invested 100 percent in equities.

The bucket approach allows retirees to feel confident about the next decade of their lives and not outliving their money.

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The 3-bucket approach to saving for retirement