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The Bucket Plan is a holistic way to incorporate all of your assets – investments, insurance, taxes, estate planning, Social Security and retirement income – and design an easy to understand, written plan that will meet your retirement goals. It accounts for the variables that can negatively affect the long-term success of a financial plan (like market volatility, taxes, inflation and life expectancy) and segments your assets based on income needs, time horizon, and tax qualifications.
The key to a successful bucket plan is strategically positioning, and then protecting, a mutually agreed-upon portion of your assets in order to buy a time horizon that allows you to invest the remainder for long-term growth. We accomplish this by establishing three phases, or buckets: the immediate (Now), the short term (Soon), and the long term (Later).
THE “NOW” BUCKET
This is the your safe and liquid money. It’s typically kept at a bank in a checking, savings, or money market account. This bucket has three primary purposes:
THE “SOON” BUCKET
This bucket contains the money you will use sooner rather than later. If you are currently retired or getting ready to retire, this would be the money needed to fund your first phase of retirement. If you are younger or has a long time before you retire, this would be any money they could access penalty-free, if you needed assets outside of the Now Bucket. The Soon Bucket should also include an inflationary hedge so there are enough funds to increase the income to keep pace with inflation when drawing from this bucket during the first phase of retirement.
THE “LATER” BUCKET
Now that you have purchased a time horizon with the money in the Now and Soon Buckets, it’s time to review the Later Bucket. Since this is the money you will not need to draw from until the later years of retirement (generally 10 years or longer), we can confidently invest it in more long-term, growth-oriented investments. As the Soon Bucket is spent down over time, the Later Bucket is used to replenish it. In addition to growth and income, the Later Bucket is used for long-term care, disability, and legacy planning.
Money Purchasing Plans
Profit Sharing Plans
Disability Income Insurance
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