Traditionally the four percent rule is used to fund a
retirement. The four percent rule is the amount of funds one can annually
withdraw from a retirement fund to provide a steady income stream. Also to be
considered is the ratio of stocks to bonds in a retirement portfolio; experts
have traditionally recommended to allocate more money to bonds than stocks as
one progresses through retirement.
However the traditional retirement strategies are being
reconsidered due to the recent recession, unstable recovery, retirement fund
liquidations, people working longer and people living longer. Social Security
Administration (SSA) estimates the average lifespan of American women at 86
years, men 84 years.
Are your retirement monies sufficient to fund a twenty or
thirty year retirement? The days of a five percent return on a CD are not only
gone, but their reappearance seems unattainable with the current economy. Funds
need some growth to hedge the increased number of years and low interest rates.
Ms. Quinn has reconsidered the traditional retirement strategies and finds the
Three Bucket Strategy has merit.
A thumbnail of the Three Bucket Strategy where funds for retirement are allocated
into three buckets:
Bucket One
Funds for current year expenses which are not covered by
income such as pensions, social security or part time jobs.
Bucket Two
Short and intermediate term bonds with the dividends
reinvested. Each year funds from bucket two are used to replenish your cash
flow and bucket one.
Bucket Three
Thirty percent of total remaining funds to invest in mutual
funds and stocks. Funds earmarked "do not touch" for 10-15 years.
It seems a strategy worth considering and perhaps
integrating into a retirement plan.
