Sure, everyone’s familiar with a ‘Bucket List’ but are you familiar with the ‘Bucket Plan’?
The Bucket Plan® Best Interest Process, a three-bucket approach to segment money based on purpose and time horizon.
Navigating market volatility, taxes, inflation and increasing life expectancy can create challenges when planning for retirement. Individuals who invest too safely run the risk of losing purchasing power due to inflation; individuals who invest too aggressively can expose themselves to significant financial loss. Both scenarios can create the risk of a client running out of money prematurely in retirement. To address these challenges, The Bucket Plan Best Interest Process can be applied to segment clients’ assets in the order they will need them, taking into account income needs, time horizon and tax qualifications.
The Bucket Plan helps mitigate the greatest dangers of retirement today; market risk, interest rate risk and sequence of returns risk. For retirees, The Bucket Plan helps to structure assets to provide reliable income throughout retirement and ensure all the assets pass on to the intended beneficiaries in the most tax-efficient manner.
For younger clients, The Bucket Plan helps navigate the challenges of saving for short-, intermediate- and long-term financial goals while ensuring proper tax diversification and a plan for the “what if” is in place.
· Bucket 1: The “Now” Bucket is designed to be a client’s safe and secure money which includes your "magic number" as well as living expenses in the first year or two of your retirement. The now bucket will also provide liquidity for larger planned expenses, such as a new car or home repairs. In the past your "Now" bucket was strictly an emergency fund, today it is much more.
· Bucket 2: The “Soon”Bucket is the preservation bucket. Because this money may be needed sooner rather than later (years 2-11 of your plan), it is invested for growth—but conservatively. This may provide income in the first phase of retirement and act as an inflation hedge to help combat the rising cost of living. By investing conservatively, a client avoids the risk of being forced to sell during a large downward swing, ultimately liquidating a bigger piece of their overall portfolio for the same dollar amount. The “Soon” Bucket is created to reduce your exposure to extreme market fluctuations, ultimately eliminating sequence of returns risk.
· Bucket 3: The “Later” Bucket is designed for long-term growth and legacy planning. Having bought a time horizon with the first two buckets, a client can choose to invest in vehicles with a longer time commitment and greater growth potential with more confidence. In retirement, this bucket can play a critical role in legacy planning too, particularly to provide income for a surviving spouse.
Want to start your Bucket Plan today? Need a second opinion on your current financial plan?
Speak to one of our Certified Bucket Plan Specialist's. Schedule an in-person/ virtual meeting to learn more about how the Bucket Plan can help your financial future.