A Safer Way to Invest for Retirement

Have Questions About Your Financial Options and Long-Term Goals?

For many people, one of the biggest concerns in retirement is not necessarily how to grow their money, but how to make sure they do not run out of it.

While market-based investments can play an important role in long-term growth, retirement planning is often different from saving during working years. Once someone begins taking withdrawals from their accounts, market downturns can have a much greater impact on how long those savings last.

This is one reason many people explore what is often called a “safe bucket” strategy.

A safe bucket strategy typically involves dividing retirement assets between growth-oriented investments and more conservative options designed to provide stability and income. The goal is to have a portion of retirement savings available in an option that may be less exposed to market volatility, especially during years when the market is down.

For example, if someone is relying entirely on market investments for retirement income and the market experiences a significant decline, they may be forced to sell investments at lower values in order to generate income. This can make it more difficult for the portfolio to recover later.

However, if that same person has a separate “safe bucket” available, they may be able to draw income from that portion instead of taking withdrawals from market-based accounts during downturns. This may help preserve the long-term value of the investment portfolio and reduce what is commonly called sequence of returns risk.

One example discussed in the video compares two retirees with similar account balances and withdrawal needs. In one scenario, the individual relied entirely on market investments for income. In the other, the individual used a combination of market investments and a safe bucket strategy. By avoiding withdrawals from market accounts during several negative years, the second retiree ended up with substantially more money remaining later in retirement.

Safe bucket strategies may include products such as cash reserves, bonds, fixed accounts, or insurance products like fixed indexed annuities. Each option has its own benefits, limitations, costs, and level of liquidity.

For some individuals, fixed indexed annuities may be appealing because they can offer protection from direct market losses while still providing the opportunity to earn interest based on market performance, subject to caps, participation rates, and other limitations.

That said, these products are not designed for maximum growth and may not be appropriate for everyone. Fixed indexed annuities often involve surrender periods, limited access to funds during certain years, and growth that may be lower than a fully invested market portfolio during strong market periods.

Retirement planning is not one-size-fits-all. The right balance between growth and safety depends on factors such as age, retirement timeline, income needs, risk tolerance, and other assets available.

At Lenhoff Financial, the goal is to help clients build a retirement strategy that includes both growth potential and protection. As an independent brokerage, the team can review multiple carriers and product options rather than being limited to one company’s offerings.

For individuals concerned about market losses, retirement income, or creating a more balanced retirement strategy, a safe bucket approach may be worth exploring as part of a broader financial plan.

This content is for educational purposes only and is not intended as financial, tax, or legal advice.

Get Financial Insights Delivered to Your Inbox

Receive educational content, updates, and ideas designed to help you make more informed decisions for your future.

Helping You Make Informed Decisions

We believe clients should fully understand their options before making an important financial decision. Explore videos covering retirement planning, policy design, tax-advantaged strategies, family protection, and the concepts behind properly structured life insurance solutions.