Episode 4: The Taxable Bucket

Now, in today’s show, I will be talking about the taxable bucket. If you joined me on my podcast from last week, you may remember me talking about how there are millions of different investment options you can choose the fund your retirement, and that the planning process is a simple three bucket system. These three buckets are the taxable bucket, the tax deferred bucket and that magical bucket that I call the tax free bucket. Of the three available buckets the one you’re probably most familiar with is the taxable Bucket. Why? Because this is the main bucket most of us have used during our lifetime. The bucket work something like this.  

A new month rolls around and some type of income is deposited into the bucket, and it starts to fill up. Then the minute the money clears the bank we start taking the money out to cover monthly living expenses, and the pocket starts to go down. Now if you’re lucky. When you get to the end of the month, you’ll have some money left in your bucket. The money left should then be used to help make sure your taxable bucket maintains a safe level of assets, which is six months of income. Or the money should be used to invest in your tax free bucket. But unfortunately, this is  not what usually happens. All too often, people decide to do one of the following with the money.  

The first group. They decide to completely empty the bucket. The second group, they decided to keep growing the bucket way beyond the amount it should contain. And the third group. They take the money out and invested in the tax deferred pocket, believing they’re doing the right thing for their retirement. But unfortunately, all three of these actions can create major problems with your retirement. Let me start by talking about the first group who choose to empty the bucket. All we have to do is look around us and we realize emptying are taxable bucket zero is not a good idea. In life there are way too many economic ups and downs, and we need to make sure we have a reserve to cover ourselves when these times happen….

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