The world is a fast-moving environment. In the last few years, we’ve had a pandemic, a war in Ukraine, major supply chain disruption that caused rampant inflation, a crazy mix of presidents, and other possible life altering events. The pandemic pushed 4.2 million people into retirement which is 2.4 million more than what was anticipated during that time period. Most of those people didn’t expect to retire that early but due to many factors, such as health concerns and the fact that the workforce was aging, they took an early retirement. Since then, 1.5 million of those early retirees have come back to the workforce because employers were desperate and offered remote and flexible work with better compensation. That’s a tough offer to turn down.

To me, it sounds like a lot of those retirees didn’t exactly expect their retirement to look like that. Most people plan on a specific goal for their retirement. They try to envision what they will do, where they will go, who they will spend their time with, and so on. I’m one of the first people to tell you that if you want to save more money you need to have a very descriptive vision of what your goal looks like but in this case, I won’t agree.

The further away a goal is, the less likely it is to look the same when you arrive. Retirement is a perfect example. Some of my clients are ten or more years away from retirement. When I ask them what they want out of retirement, I get a lot of blank stares. That is a perfectly reasonable response. So much could happen before you get there. You could change your lifestyle such as finding a new passion for sailing, golf, or some activity that changes what you want to do with your life. You could change your mind and decide you never want to stop working because it gives you meaning. Your family could grow, and you want to spend more time with them. The government could pass some healthcare or social security laws that impact your budget. The market could go into a recession and delay your timing. You could experience health issues that limit the activities you wanted to do in retirement. There are so many things that could happen that change your vision of retirement, and this could cause unnecessary disappointment. You didn’t fail to hit your goal, it just changed.

So, what do you do about retirement?

All we have to do is change how we think about what you will do after you stop working. Instead of calling it retirement, we will call it FIP for the financial independence period. Retirement implies we are done working which may not be the case. We also need to create a plan that considers all the costs that can occur during FIP. I like to simplify these savings plans by creating buckets that cover specific costs. There can be as many buckets as you want, but I like to focus on a few as a foundation to life after the paycheck.

Healthcare bucket

A good plan that considers possible health issues first will create a foundation for the FIP. Never rely on another party, such as the government, to handle these expenses. You don’t want to be in your 80s, unable to return to the workforce, and not have enough income to cover these costs if the government pulls the rug out on the socially funded programs.  You need enough to cover hospice care, health insurance, co-pays for the doctor, rehabilitation, and other potential healthcare costs. You won’t be able to enjoy FIP if you aren’t healthy. Work with financial planner to determine how much you should save for this bucket.

Living expenses bucket

This bucket covers your basic living needs. You will need to create an organized list of your anticipated monthly expenses. Think of your expenses for food (groceries, dining out, etc.), transportation, housing (mortgage/rent, utilities, etc.), insurance, gifts, pets, entertainment, personal care, and other possible monthly expenses you will need in the FIP. Your financial planner should have software or a spreadsheet that helps you create this budgeting organizer. This organizer will help you consider potential expenses you would have in FIP.

Pro tip: be conservative with your estimates. Don’t underestimate how much these expenses will be or you will have to dip into your flex bucket and limit what you can do in FIP.

Flex bucket

This is the fun bucket. Your flex spending is the bucket that will pay for your activities you want to do while in the financial independence years. You don’t have to save for any particular activity but think hard about the benefits you will receive while stuffing this bucket full. The possibilities of things you can do will grow in line with the growth of this fund. You could start another business, travel, buy a house near your grandchildren, sail around the world, or any other goal that may come up when you retire. If you find a passion for a new activity, you can look at this bucket and say that this will pay for that dream. If you change your mind, you can look at this bucket for that dream. The flex bucket pays for whatever dream comes along. It is fluid not static.

Reach out to Ryan Kaysen at Integritas Financial to start your bucket plan. We love to hear how you will spend your flex bucket.

Fiduciary Mission

At Integritas Financial, we are committed to providing fee-only, fiduciary financial planning services that are tailored to the unique needs of young professionals, particularly millennials. Our experienced planners work with you to develop customized financial plans that address key areas such as estate planning, trusts and wills, retirement, workplace benefits, education funding, student debt, and buying a house.

We believe in transparent, client-focused service that puts your financial goals at the center of everything we do. As a fiduciary firm, we are dedicated to acting in your best interests, and we never sell products that charge commissions to clients.

Our goal is to help you achieve a stable and prosperous financial future by providing comprehensive financial planning services that are tailored to your individual needs. Whether you're just starting out in your career or you're already well-established, we can help you navigate the complexities of financial planning and create a roadmap for success.

Ryan@if-money.com