A Thoughtful Approach to Managing Finances

Using Two Distinct “Buckets”
Brian A. Magnan CFP®, AIF®
Director - Magnan Family Wealth Management


Lump Sum Withdrawals Bucket:
This bucket is typically invested in bank savings accounts or money market funds.

Advantages:
  • Immediate access to the principal, regardless of market conditions.

Tradeoffs:
  • Interest earned may not surpass the combined impact of inflation, taxes, and future withdrawals.
  • Having too much money in this bucket risks running out of funds over a lifetime.
  • Having too little may force accessing the income bucket during market downturns.

Determing the optimal savings amount involves assessing current needs and future goals.


Income Withdrawls Bucket:
  • This bucket is usually invested in ownership of companies (e.g., the stock market).
  • Reframing the investment as ownership of companies helps contextualize price fluctuations.
  • Over time, the value of these companies should appreciate more than inflation, taxes and withdrawals.
  • Risks include needing withdrawals during market declines (20-50%).
  • When income is required during a significant market decline, consider tapping the savings bucket.

Planning Considerations:
  • Discuss income requirements and potential lump sum withdrawals with financial advisors.
  • Even remote possibilities of lump sum withdrawals should be factored into the plan.
The Value of Conversions: 
  • Engaging in bucket discussions with a neutral third party (like a financial planner) is invaluable.
  • Couples benefit from focused conversations about spending priotities and financial goals. 


Remember, the "Goldilocks" amount varies for each individual, and it's not necessarily a percentage of net worth.  It's about finding the right balance based on your unique circumstances.  


Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Magnan Family Wealth Management is a seperate entity from WFAFN. 




Magnan Family Wealth Management

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