How to Navigate Retirement Income in Uncertain Markets
A Deep Dive into our Retirement Income Process
By: Allison Schmidt, Financial Advisor, CFP ®, CPA
In today’s uncertain market, we understand that peace of mind is more important than ever. That’s why we want to take a moment to remind you of our income process here at Higgins & Schmidt Wealth Strategies, designed to help you navigate these turbulent times with confidence.
As I discussed in my previous post, “Navigating Market Volatility,” a sound financial strategy requires both offense and defense. Our income strategy is the cornerstone of our defensive approach for clients drawing income, ensuring cash is available regardless of market fluctuations. This approach is often referred to as the “Bucket” strategy.
At Higgins & Schmidt Wealth Strategies, we utilize a “Bucket” strategy for retirement income planning, dividing your assets into distinct “buckets” based on your time horizon and risk tolerance. This strategy aims to provide a steady, reliable income stream while safeguarding your portfolio from market volatility. Let’s take a closer look at the key components:
1. Short-Term Bucket (3-6 Months of Cash)
- Purpose: To cover your immediate income needs.
- Assets: 3-6 months’ worth of living expenses in cash or highly liquid investments.
- Strategy: We proactively bring 6 months of your withdrawals to cash at the beginning of each quarter.
- Goal: To ensure you have cash readily available when you need it, no matter what the market is doing.
2. Mid-Term Bucket (5+ Years)
- Purpose: To provide income for the medium term, typically 5+ years.
- Assets: Lower volatility assets such as bonds and alternatives.
- Strategy: We aim to have another 5+ years’ worth of your monthly withdrawal in lower volatility assets.
- Goal: To help you weather the next bear market without being forced to sell stocks when they’re down.
3. Long-Term Bucket (Growth)
- Purpose: To focus on long-term growth, keeping pace with inflation and ensuring longevity of your assets.
- Assets: Long-term growth assets such as high-quality stocks.
- Strategy: Based on your Personal Investment Policy, the remaining assets are invested in long-term growth assets.
- Goal: To ensure your portfolio and income are positioned for long-term growth, helping you maintain your lifestyle throughout retirement.
By strategically allocating your assets into these three buckets, we create a more stable and predictable retirement income stream while positioning your portfolio for long-term growth. This approach helps you avoid selling stocks during market downturns and ensures you have the cash you need, when you need it.
We believe this income strategy will help you consistently achieve your retirement spending goals, even in challenging market conditions. We anticipated this market volatility and prepared for it in advance, because market fluctuations are inevitable. This income process, alongside our investment process, prepares us and our clients for any market direction. We’re here to help you navigate these times with confidence and stay on track toward your financial goals.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Higgins & Schmidt Wealth Strategies, a registered investment advisor and separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification and asset allocation does not ensure a profit or protect against a loss. Stock investing involves risk including loss of principal. All indices are unmanaged and may not be invested into directly.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries
