Retirement Assets Bucket The third bucket is retirement assets. These are 401(k)s, Individual Retirement Accounts
(IRAs), pension accounts and the like. For the most part these retirement assets accumulate during your working career. For our purposes we also group Social Security into this bucket as for most people social security begins to pay out once they stop working. On an annual basis they increase from contributions (made by either you and/or your employer) plus the
annual growth in value. They could have a “tax-free� aspect if you use the ROTH IRA feature. For most people this bucket will grow gradually over time, and depending on your age and how close you are to retirement age and your risk profile, the asset allocation will change from more risk in your younger years to less risky as you get closer to retirement.
There are some required distributions that need to be made based on your age and the balance in the account.
The Retirement Bucket can grow quite large and be a major component of your net worth and a large contributor to your after work cash flow. Your CPA Shovel should work with you to calculate distributions over a long period.
The Retirement Assets Bucket contains assets that are specifically intended for use during retirement. During your working career, these assets are allowed to accumulate over time in the Retirement Assets Bucket, before being transferred into your Liquid Assets Bucket at retirement age.
Essentially, during retirement the assets in this bucket will replace the monthly paycheck you earned during your working career, thus making it critical to begin growing the assets in this bucket early.
40 | Five Buckets, Four Shovels, a Beach and a Map
