Bucketology – The art of balancing your portfolio and distributing your wealth to manage your taxes, cash flow, and risk.
As you approach retirement, it is not enough to have a large amount of money in qualified IRA or 401(k) accounts or to have it all tied up in stocks and bonds. The premise of Bucketology is a strategic distribution of your wealth between three buckets: Cash, Non-Tax Deferred (brokerage, stocks, and bonds), and Tax Deferred (IRA, 401(k), and 403(b) accounts). Getting these buckets balanced is imperative to the success of your retirement plan.
Two helpful questions to ask yourself and your advisor when assessing the state of your buckets are:
Do I have enough cash on hand to ride out a recession?
Do I have the right balance between IRAs/401k’s and non-tax deferred buckets to help manage my taxes in retirement?
Getting to the bottom of these simple questions can reveal possible problems in your investment strategy and help to mitigate your risk. When managed correctly, these buckets can be turned on and off to accommodate changing markets and the needs of the investor.
For example, during a bear market the cash bucket can be turned on and the Non-Tax Deferred bucket turned off to cover expenses and minimize portfolio loss. In retirement, the three buckets work together to provide income while maintaining a low taxation rate and an adequate degree of liquidity.
Understanding and implementing Bucketology doesn’t have to be complicated! Questmont has been practicing it for over 30 years and has time tested strategies ready to lighten your load.
Contact us today to schedule your complimentary, no-obligation consultation!