Retirement Week: What’s In Your Bucket?

As part of National Save for Retirement Week, I’m (surprise!) writing about retirement issues.  Today, I want to talk about your retirement “bucket,” or the different parts of your retirement savings and how they’ll work together to provide income.

Imagine your monthly retirement income needs are a bucket.  You need to fill this bucket in order to provide enough income for your needs.  You fill the bucket with various bits of income (rocks) that hopefully come together to meet all your needs.

If the bucket analogy doesn’t work for you, consider thinking of it like a river.  You’ll have various streams of income, and you hope that they come together to have enough to fill the river of your retirement needs.
Your Retirement BucketIn our family, the biggest rock is my husband’s military retirement pay.  After that, we have income from our IRAs, my husband’s TSP, and my business retirement accounts.  We’ll have some income from rental real estate.  I anticipate that one or both of us will continue to work in some fashion, even if it is mostly for fun.  And, perhaps, we’ll have some Social Security benefits.

Take a few minutes to consider what sources of income you anticipate having when you retire, and whether that income will be enough.   You can’t know for sure, but you should be able to make some good estimates.  If your bucket is looking a little empty, think about how you can shrink your bucket by decreasing your needs, or fill it by making some of your existing rocks (or streams) bigger or creating more rocks to fill the gaps.  Could you increase your TSP contributions to make that rock a little larger?  Could you start a little side business and funnel most of that income towards retirement through a SEP IRA, a SIMPLE IRA, or an individual 401(k)?

You can probably imagine many other ways to think about your retirement income – I’d love to hear about them.   Whether you use rocks or streams or birds or rainbows doesn’t matter, but it is vitally important that you are thinking about the fact that you’ll probably need a variety of types of income, and how you’re going to create them.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • robertabbott

    This is one of the things that should be covered via a workshop whether in the military or a civilian workforce. The reality of living on a fixed income can be very sobering. The thrills have limitations,( a movie or live entertainment every now and then) it’s about dealing with the necessities. (i.e. rent/mortgage and utilizes) Have to be sure to budget for groceries. Plan for retirement real well. No reset button and no time machine to go back to the past years for adjustments.

  • John Willcockson

    Kate, great start on the “bucket list.” Other financial bloggers make that point that buckets for retirement finances can be arranged near-term to distant. The near term bucket uses a bank savings or money market account and holds enough cash to fund the next 2 or 3 years of living expenses. It’s basically your emergency fund all grown up for retirement. Next in line is a bucket with money to cover expenses 3 to 8 years from now: the “near future” bucket. The near future bucket can use bank CDs or even bond funds (say, from a low-cost provider like TSP or Furthest out is a bucket with money for expenses 8 to 10 years or more away. This “distant future” bucket can use bond and stock funds, again from low-cost providers like TSP or As the current spending bucket (fka the emergency fund) gets depleted by living expenses we transfer in money from the near future bucket of CDs and bonds. Likewise we transfer money from the distant future bucket of stocks (& bonds) to replenish the near future bucket. Using tax-advantaged accounts like TSP and IRAs for the future buckets means you can avoid capital gains taxes when transferring or re-balancing between stock and bond assets classes. Cheers!