Preparing for an ‘earlier’ retirement requires making sure our money lasts. Having various ‘buckets’ of resources is how we won’t lose our minds when the stock market takes a bit of a tumble.
Before I begin, if you are worried about your money in the stockmarket, please watch this video. You’ll feel MUCH better.
Buckets 1 & 2 – Our Retirement Accounts
We have amassed, in my opinion, a significant amount in our 401K retirement accounts. I will always be an advocate of the stock market, as it has proven over and over again that it recovers. Slow, steady and consistent investing will give you the money you need over time. We are proof.
We have two retirement accounts, and consider them buckets 1 & 2.
The first bucket will have ultraconservative investments, and we will use it to get through the first 7 years of retirement.
The second bucket will be money we will let grow. We figure we have another 12 years of growth.
Bucket 3: CASH.
My goal before we retire is to have $200,000 – $250,000 in cash reserves. I believe this will be enough for us to weather a long down market.
Our cash goal is a lofty one, but one we could do. Thanks to my husband’s career, the fact that he was never unemployed, and his hard work to get to the position he’s in, we are now able to bank 50% of his take home salary. (Of course it doesn’t hurt that all four kiddos are off Mom & Dad’s payroll!). If I’m diligent with our budget, this goal can be obtained in three years. I will take the fourth year to pay off our mortgage, which is the only way my conservative husband will retire. 😉
Bucket 4: Social Security
Of course, we will have social security (yes.we.will). We won’t start receiving it until year 7 of our retirement. (I’ll receive mine two years before hubby). If we keep our expenses low, it will cover 3/4 of our monthly expenses.
Bucket 5: A Divorce Settlement Pension (My HealthCare Plan)
May I just say I earned every penny of this? For all those that may not know, I was married and divorced in my 20’s. I will never go into the specifics of that, but I came out ahead with two GORGEOUS daughters and a pension. I will receive the pension at age 62 (the same year my husband plans to retire). I will take it as a lump sum, then roll it into an IRA. This should cover most of our healthcare needs before medicare kicks in.
I believe it’s imperative to have several ways to get money in retirement, and cash will play an even more important roll in the future.
How are you saving for retirement? Or, how are you spending in retirement? Please share in the comments.