60 S G M A G A Z I N E | S P R I N G 2 0 1 8 EXPERTS CORNER A Bucket Plan to Go with Your Bucket List Steve Boatner The baby boomers have re- defined everything they’ve touched, from music to marriage to parenting and, more lately, to what “old” means—60 is the new 50! Longer, healthier living, however, can put greater stress on the sustainability of retirement assets. There is no easy answer to this challenge, but let’s begin by discussing one idea—a bucket approach to building your retirement income plan. The Bucket Strategy can take two forms... The Expenses Bucket Strategy With this approach, you segment your retirement expenses into three buckets: • Basic Living Expenses food, rent, utilities, etc. • Discretionary Expenses vacations, dining out, etc. • Legacy Expenses assets for heirs and charities This strategy pairs appropriate investments to each bucket. For instance, Social Security might be assigned to the Basic Living Expenses bucket. If this source of income falls short, you might consider whether a fixed annuity can help fill the gap. With this approach, you are attempting to match income sources to essential expenses. The guarantees of an annuity contract depend on the issuing company’s claims- paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). For the Discretionary Expenses bucket, you might consider investing in top-rated bonds and large- cap stocks that offer the potential for growth and have a long-term history of paying a steady dividend.¹,² Finally, if you have assets you expect to pass on, you might position some of them in more aggressive investments, such as small- cap stocks and international equity.³ International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risk unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. The Timeframe Bucket Strategy This approach creates buckets based on different timeframes and assigns investments to each. For example: • 1-5 Years This bucket funds your near-term expenses. It may be filled with cash and cash alternatives, such as money market accounts. Money market funds are considered low-risk securities but they are not backed by any government institution, so it’s possible to lose money. Money held in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund. Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and The Investment Centre at CBC Bank