**From Fear to Financial Freedom: A Path to Retirement Confidence**
As I approach my 60s, I’m haunted by an irrational fear that I’m not financially prepared for retirement. Despite my intellectual confidence, the uncertainty of the market and the loss of a steady income stream keep me up at night. My wife and I are hoping to retire within the next three years, but we’re unsure if our current portfolio setup will allow us to maintain a reasonable lifestyle without depleting our resources.
We’ve got a solid foundation: no debt, two vehicles, a house, and a cabin worth $650,000. Our combined Social Security income is projected to be $5,700 per month at age 67 and $7,400 per month at 70. Our annual expenses, including health insurance, entertainment, and travel, are around $70,000 in 2024 dollars.
To alleviate my fears, I need a clear understanding of our financial situation and a strategy to make the most of our money. That’s where the bucket strategy comes in – a mental accounting approach that helps visualize our holdings in a way that makes sense. By organizing our accounts into tax-deferred savings, tax-free growth, and taxable savings buckets, we can ensure a diverse income stream and minimize our tax burden.
Our tax-deferred retirement accounts, including a 457(b), 403(b), and employer-sponsored plan, total around $943,000. We also have Roth IRAs worth $260,000, which offer tax-free growth and can be tapped into penalty-free at 59½. Our brokerage accounts and cash holdings provide a comfortable cushion.
To cover our expenses from retirement to Social Security, we’ll need to rely on our cash reserves. With good financial planning software, we can run exact numbers and adjust our strategy as needed. A back-of-the-envelope analysis suggests that our current holdings will cover our projected expenses, and our accounts might even grow over time.
While retirement spending projections are uncertain, we can take comfort in knowing that we have a solid foundation and a clear path forward. By visualizing our financial situation through the bucket strategy, we can shift from fear to confidence, ensuring a comfortable and fulfilling retirement.
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