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.
In 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.