The 3 Bucket Savings Strategy

 In Ozarks Live, Financial Planning, Productivity, Retirement, Tips

The 3 Bucket Savings Strategy

The road to retirement may be filled with curves or potholes, having a plan to navigate the road ahead is vital. It may be hard to visualize the now becoming the future and how the two are so dependent on each other.  I’ll explain it this way: there are 3 stages that we can breakdown our retirement funds into.

The stages are when we begin working, working throughout the years, and retirement. We can visualize by creating 3 contribution buckets and naming them #1 Taxable, #2 Tax Deferred, and #3 Retirement, and splitting up our contributions between all of them. Here is a breakdown of how this works:

Bucket #1: Taxable

In the beginning, so the first stage, we need to focus on developing good habits for saving money. Some simple examples could be to create a budget that works for you and sticking to it, or cutting back on eating out and buying things you don’t really need. This is also a stage where we are trying to build up our cash reserves as we enter adulthood.

We will also be experiencing the early years of being an adult meaning buying a first home, getting married, starting a family, or buying a car- something that creates debt for an extended period of time. When creating a budget, think of it as if you will be paying yourself with your savings in the future. In this stage the main goal is to build up cash reserves though dividends, interest, 1099’s, and other financial vehicles which generate current taxable income.

Bucket #2: Tax Deferred

Now we’re in our career phase, where we have consistent and reliable employment and we’ve already developed a budget. This is when you start noticing your good habits from the first stage really being put to use and paying off. In  this stage there is about a twenty to thirty year window to build, build, build your savings and investments. Compounding the growth with deferred accounts (ESP’s) to save as much as you can, and utilizing things like IRA’s, 401(k)’s, NQ Annuities, and of course continuing to reduce debt as quickly as you are able to makes the process of boosting your savings significantly smoother. All of those options will create a lot of good savings to fall back on later in life.

Bucket #3: Retirement

Now your in the retirement stage, WooHoo! You are choosing to be “unemployed” and all of the money that you have saved over the years will be there to supplement Social Security and other income sources. Having money in tools such as Roth IRA’s, municipal bonds, and life insurance which create tax-free retirement income will be a big help.

In summary, there are many different sources to help create sustainable income, but it all starts with developing those good habits we talked about in the first stage. Using the buckets, we can visualize the need to think in three different steps when planning ahead for retirement and not just put all your money and investments in one place and call it good.

As always, if you have any financial questions or would like more information on this topic, give our office a call anytime at 417-882-1800 and make sure to tune into Bruce’s show next week. 


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We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives.  This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice.  All investments are subject to risk including the potential loss of principal.  No investment strategy can guarantee a profit or protect against loss in periods of declining values.  

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.   

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice.  Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.  Our firm is not affiliated with the U. S. government or any governmental agency.  Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM).  AEWM and The Resource Center are not affiliated companies.  AW03182122

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