Take This Simple Step As You Approach Retirement

Don’t wait until the last minute to fill up your cash bucket. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=53505&elqTrackId=1888399be79c462ba6784e37293b0c4e&elq=020df63cb19c45ef8200d9646c5d93e8&elqaid=53505&elqat=1&elqCampaignId=27130) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] I often write about [the Bucket approach to retirement portfolio planning](. In [a basic Bucket portfolio]( a retiree holds one to two years’ worth of anticipated portfolio withdrawals in cash investments, another five to eight years’ worth in high-quality bonds, and the remainder in investments with growth potential, mainly a globally diversified basket of equities. The virtue of that setup is that the retiree should always be able to draw living expenses from an asset class that’s in the black. After last year’s rally, US stocks were ripe for pruning in many portfolios. When rising interest rates roiled stocks and bonds in 2022, tapping cash allowed bucketed retirees to leave their longer-term investments alone. As we noted in [our recent white paper on diversification and correlations]( cash and high-quality bonds have been superb diversifiers for equities over the past several decades. In years when stocks are down, one or both of those asset classes will typically hold their ground. While most retirement portfolios will include allocations to stocks and bonds in the years leading up to retirement, most retirement savers don’t hold much more than an emergency cushion in cash. Thus, an important job in the two or so years leading up to retirement—right up there with figuring out your healthcare coverage and winding down your (paid) work activities—is building up that cash cushion. In addition to being there as a source of funding when you eventually retire, cash has the salutary effect of providing a buffer [if you retire earlier than you expected]( due to unforeseen circumstances. The good news is that cash yields are way up this year, and many equity portfolios are due for rebalancing, so the timing of building cash seems pretty good, too. In [this week’s column]( I delved into the questions of how much cash to hold, which account type to build it in, and where to go for the funds. We’ve also been running my Investing Road Map series over the past few weeks. As I’ve been updating these articles, I’ve been struck by the fact that they’re pretty darn useful. There’s a roadmap for all of the major life stages: [early career accumulators]( [midcareer accumulators]( [preretirees]( and [retirees]( and my hope is that you’ll find some valuable tips in them. Speaking of worthwhile series, Amy Arnott recently highlighted which stocks and mutual funds have added or subtracted the most from investors’ coffers over the past decade. There are four parts: [wealth-creating mutual funds]( [wealth-creating stocks]( [wealth-destroying funds]( and [wealth-destroying stocks](. Finally, [John Rekenthaler’s recent piece]( on the perils of acting on macroeconomic prognostications is a sobering must-read. John used Pimco’s “new normal” to make his case, but the message is a timeless one. With warm regards, Christine Benz [Take This Simple Step As You Approach Retirement]( Don’t wait until the last minute to fill your cash ‘bucket.’ [Find Out More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [The Bucket Approach to Retirement Allocation]( A diversified portfolio with various time frames can help you meet your income needs during retirement. [See More]( [3 Retirement Bucket Portfolios for Minimalists]( These portfolios use index funds as building blocks—as well as a little bit of cash. [Read More]( [How Did Diversified Portfolios Hold Up in 2023?]( Delve into Morningstar's 2023 analysis of portfolio diversification strategies. Uncover insights on correlation trends, asset class performance, and what it all means for building diversified portfolios. [Get the Report]( [8 Tips for Investing in Your 20s and 30s]( Tips on getting the most bang for your investment dollars when you’re just starting out. [Check it Out]( [An Investing Road Map for Pre-Retirees]( The late 50s and early 60s are the perfect age for investors to embark on a savings sprint, assess the viability of their portfolio, and build out their stake in safer securities. [Read More]( [8 Tips for Investing in Your 40s and 50s]( Key financial priorities for investors in the peak earnings years of their 40s and 50s. [Get Peak Earning Year Tips]( [An Investing Road Map for Pre-Retirees]( The late 50s and early 60s are the perfect age for investors to embark on a savings sprint, assess the viability of their portfolio, and build out their stake in safer securities. [See Roadmap]( [An Investing Road Map for Retirees]( Tips on asset allocation, Social Security, annuities, withdrawal rates, and more. [Get Tips]( Get Top Stock Picks and Market Insights Every Week on The Morning Filter. Every Monday morning, Susan Dziubinski sits down with Morningstar Chief U.S. markets strategist Dave Sekera to discuss what's on his radar, new Morningstar research, and stock picks or pans for the week ahead. 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