A Bucket Plan to Go with Your Bucket List

The baby boomers redefined everything they touched, from music to marriage to parenting and even what “old” means – 60 is the new 50! Longer, healthier living, however, can put greater stress on the sustainability of retirement assets.

There is no easy answer to this challenge, but let’s begin by discussing one idea – a bucket approach to building your retirement income plan.

The Bucket Strategy can take two forms.

The Expenses Bucket Strategy: With this approach, you segment your retirement expenses into three buckets:

*Basic Living Expenses – food, rent, utilities, etc.

*Discretionary Expenses – vacations, dining out, etc.

*Legacy Expenses – assets for heirs and charities

This strategy pairs appropriate investments to each bucket. For instance, Social Security might be assigned to the Basic Living Expenses bucket. If this source of income falls short, you might consider whether a fixed annuity can help fill the gap. With this approach, you are attempting to match income sources to essential expenses.[1]

The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies).

For the Discretionary Expenses bucket, you might consider investing in top-rated bonds and large-cap stocks that offer the potential for growth and have a long-term history of paying a steady dividend. The market value of a bond will fluctuate with changes in interest rates. As rates fall, the value of existing bonds typically drop. If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity an investor will receive the interest payments due, plus their original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Dividends on common stock are not fixed and can be decreased or eliminated on short notice.

Finally, if you have assets you expect to pass on, you might position some of them in more aggressive investments, such as small-cap stocks and international equity. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risk unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

The Timeframe Bucket Strategy: This approach creates buckets based on different timeframes and assigns investments to each. For example:

  • 1 to 5 Years: This bucket funds your near-term expenses. It may be filled with cash and cash alternatives, such as money market accounts. Money market funds are considered low-risk securities but they are not backed by any government institution, so it’s possible to lose money. Money held in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund. Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
  • 6 to 10 Years: This bucket is designed to help replenish the funds in the 1-to-5-Years bucket. Investments might include a diversified, intermediate, top-rated bond portfolio. Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline.
  • 11 to 20 Years: This bucket may be filled with investments such as large-cap stocks, which offer the potential for growth.
  • 21 or More Years: This bucket might include longer-term investments, such as small-cap and international stocks.

Each bucket is set up to be replenished by the next longer-term bucket. This approach can offer flexibility to provide replenishment at more opportune times. For example, if stock prices move higher, you might consider replenishing the 6-to-10-Years bucket, even though it’s not quite time.

A bucket approach to pursue your income needs is not the only way to build an income strategy, but it’s one strategy to consider as you prepare for retirement.

 

“Friendship is born at that moment when one person says to another, ‘What! You too? I thought I was the only one.'”

-C.S. Lewis


Recipe of the Week

Amish Sugar Cookies to Share

Amish Sugar Cookies

5 Dozen

Ingredients:

  • 1 cup butter, softened
  • 1 cup vegetable oil
  • 1¼ cups sugar
  • 1¼ cups confectioners’ sugar
  • 2 large eggs
  • 1 tsp. vanilla extract
  • 4½ cups flour
  • 1 tsp. baking soda
  • 1 tsp. cream of tartar

Directions:

These cookies are so easy to make and the perfect dessert to share with friends. They’re sweet, soft, and perfect to go around. Have a family BBQ, school meeting, or book club coming up? Wow the crowd at your next gathering with these sweet treats.

  1. In a large bowl, mix together the butter, oil, and sugar until blended. Mix in the eggs and vanilla, and blend.
  2. Combine the dry ingredients (flour, baking soda, cream of tartar) and gradually add to the wet mixture until smooth.
  3. Measure out a spoonful of dough and place it on an ungreased baking sheet. Bake at 375° F for 8 to 10 minutes or until golden. Chill and serve!

 

Recipe adapted from Taste of Home[2]


Tax Tips

Roth vs. Traditional IRAs: What’s the Difference?

Roth and Traditional IRAs are popular retirement savings accounts and have some similarities and differences. Here are a few:

Income Limits
Anyone who has earned income and is younger than 70½ can contribute to a Traditional IRA. Roth IRAs have income eligibility limits for contributions. Single filers can’t earn more than $137,000, and married couples can’t earn more than $203,000.

Tax Incentives
Traditional IRA contributions are generally tax deductible when you make the contributions, and withdrawals in retirement are taxed at the current income tax rate. Contributions to a Roth IRA aren’t tax deductible, but earnings and withdrawals are generally tax free.

Withdrawal Rules
Traditional IRAs require you to start taking minimum distributions at age 70 ½. Roth IRAs don’t have any required minimum distributions.

Deciding which retirement savings account is right for you is a personal decision and will depend on your income tax bracket (both now and when you retire), your income, and other criteria. A skilled financial advisor can help you decide which option, if any, is right for you.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Tip adapted from IRS.gov[3]


Golf Tip

Stick Your Finish

There are many mechanics to consider in a golf swing, from the tee up to the follow through. But one of the most important parts of the swing is often overlooked – the finish. Professional golfers have mastered how to swing with speed and power, but still slow down at the end of their swing to remain balanced and poised.

To achieve this for yourself, make sure you stick your finish throughout your whole swing and put the majority of your weight in your front foot. Not only will this help stop you from topping the ball, but it will give your shot the maximum amount of power through that front leg. You should also be driving power through your hips and glutes, not your momentum or lower back. This will help you stick your finish like a champ (and protect your back)!

Tip adapted from Golf Digest[4]


Healthy Lifestyle

Eat This, Not That: Easy Food Swaps Anyone Can Do

Eating healthier doesn’t have to be hard! In fact, you might not have to make any major changes in your current diet! By swapping out unhealthy options for healthier picks, you can cut the bad stuff and still enjoy your meal. Here are some of our favorite food swaps:
  • Mustard instead of mayonnaise (0 calories vs. 90 calories)
  • Scrambled eggs with green onions instead of cheese (170 calories vs. 275 calories)
  • Sparkling water instead of soda (0 calories vs. 140 calories)
  • Fresh fruit instead of dried fruit (69 calories vs. 325 calories)
  • Greek yogurt instead of sour cream (28 calories vs. 60 calories)
  • Olive oil spray instead of a tablespoon of olive oil (5 calories vs. 120 calories)
  • Corn tortillas instead of flour tortillas (100 calories vs. 280 calories)
  • All-bran cereal instead of granola (80 calories vs. 200 calories)
  • Goat cheese instead of Brie cheese (70 calories vs. 100 calories)

There are lots of healthy swaps, like these, that can help you reduce your caloric intake, consume less sugar, and make it easy to create a more-balanced meal.

Tip adapted from Eat This, Not That[5]


Green Living

Composting 101: Turn Waste Into Reward

Composting is an easy way to turn extra food, yard waste, and even some used paper into nutrient-rich mulch you can use for your garden. Plus, it’s great for the environment and helps reduce landfill waste.

It’s easy to compost at home. All you need is a compost bin, which you can make yourself or buy online. Compost bins usually need to turn in order to aerate the waste.

You can compost lots of items, including:

  • Wood chips and pellets
  • Table scraps
  • Shredded newspaper
  • Leaves and yard waste
  • Dryer lint

The mulch made from these compostable materials is great for your garden because it helps aerate the soil, break down organic material for plant use, and ward off plant disease. It also offers a natural alternative to chemical fertilizers, reduces landfill waste, and may help to prevent global warming and climate change.

Tip adapted from Earth Easy[6]