Bucket number 3 is money for retirement. This is a bucket we all hope to get started on as soon as possible. Getting started with bucket number 3 at an earlier age allows us to invest more aggressively in order to take maximum advantage of our longer time horizon. Investing more aggressively for a longer period of time can be astoundingly effective.

Ideally money for bucket number 3 will be held in either 401(k) or IRA accounts: what we call “qualified” accounts. We call them qualified accounts because they qualify for special tax treatment. You may also have the option to elect ROTH contributions, or use a ROTH IRA. All of these options provide good benefits. The benefit is that you can trade in and out of different investment funds inside these accounts without tax consequences. Being smart with taxes creates tremendous advantages over the long run. (For more information on ROTH specific questions, please check out this article.)

Over time different items in buckets one and two get checked off and thus they require less attention. This provides a great opportunity to really sock away some more money for retirement and fill bucket number 3 as much as possible. Unlike buckets one and two, there is usually not an end point to the retirement bucket. The more resources we have in the retirement bucket, the better retirement gets!.

Similar to bucket number 2, the retirement bucket has an investment glide slope. As retirement years draw closer, we begin to take the foot off the gas pedal and start to invest more conservatively. This bucket is very different from the others because the funds in this bucket need to last your entire life. For this reason, there is a risk management layer that is added to this bucket, to help make sure the money is positioned to last through different market cycles of your retirement. Different layers of risk management include spreading out your money to different asset classes, across different geographic regions and lower correlations. A strategic portfolio design that strives for lower market correlation while still targeting long term returns over multiple market cycles is what makes money last a lifetime.

Are your funds in your retirement bucket positioned correctly? Reach out if you would like to discuss. At Schulz Wealth our initial visit is always free of charge. Email me at austin.smith@schulzwealth.com or schedule a call by clicking here: Austin’s Calendar.  

 

*This is the final article in the multi-part series.

The first article can be found here.  

The second article can be found here.

The third article can be found here.