One of the most common questions we hear from Wyoming retirees is: “Will I have enough money in retirement?”

After hundreds of conversations over the past decade, we know retirement can be both exciting and intimidating. Replacing a steady paycheck with withdrawals from your savings raises an important question: How can you make your money last for 30 years or more?

One retirement income principle we use at Hale Financial is the bucket approach.

LOOK AT RETIREMENT AS TWO BUCKETS

We find it helpful to view a retirement portfolio as two distinct buckets: a growth bucket and a safety bucket.

This simple framework can help retirees stay focused during market ups and downs and better understand the role each part of their portfolio plays.

THE GROWTH BUCKET

Occasionally, we meet retirees who want to move entirely out of the stock market once they retire. While the desire to protect savings is understandable, avoiding growth investments altogether can create challenges.

First, retirees must contend with inflation. Over time, rising prices reduce the purchasing power of your savings. As an example, the Whopper meal I buy more often than I care to admit costs about $11 today. I have little doubt that one day it will cost $15, then $20, and eventually much more. That's inflation at work.

Stocks and other growth-oriented investments have historically helped investors keep pace with inflation, making them an important part of many retirement plans.

Second, growth investments create opportunities beyond simply generating income. A portfolio that continues to grow may support goals such as leaving an inheritance, making gifts to family, or increasing charitable giving.

THE SAFETY BUCKET

Growth investments come with volatility, which is where the safety bucket comes in.

While no investment is without risk, setting aside a portion of the portfolio in investments such as short- and intermediate-term bonds or money market funds can provide retirees a source of income that is generally less affected by stock market declines.

This can help in two ways. First, it may reduce the need to sell stocks during market downturns, giving investments time to recover. Second, it can provide peace of mind. Knowing that part of your portfolio is designed for stability can make it easier to stay committed to your long-term investment strategy.

IN SUMMARY

A successful retirement requires balancing growth and stability.

The growth bucket helps combat inflation and supports long-term goals, while the safety bucket helps provide reliable income and stability during market downturns.

Viewing your retirement portfolio through this two-bucket framework can help reduce anxiety during periods of volatility and increase confidence that your retirement plan is built to last.