Pre filled " Buckets" - overkill?

[Flyfish1]

So, I just retired 6 weeks ago and I pre filled one year ahead several " buckets" . Meaning cash designated for certain items, like real estate taxes, HOA fees and the big one, travel. My original thought was to always maintain one year ahead of these pre filled buckets. But, now I am questioning the logic of that. By doing so, I am creating yet another cash reserve, when I already have a cash reserve account. At present money market rates , that ain't so bad, but that will change.

Money comes in every month or every quarter so why set aside a whole year in advance? Some expenses have clear due dates, like the HOA and real estate taxes so planning for that expense is easy. Travel of course has a budget per year , but the timeline is more flexible.

I am probably overthinking this. Thoughts ?
Thanks

 

[Montecfo]

I do not do separate reserves for specific expenses. I have money moving from investments to high rate MM account (5%+) quarterly based on annual expected spending.

I fund a semi monthly "paycheck" that goes to checking. So funds earning little are minimized.

 

[Sojourner]

I am probably overthinking this. Thoughts ?

IMHO, yes you are overthinking it. As long as you have cash accounts (spending/checking, savings, etc.) that you "top off" from time to time, then all you really need to do is make sure your spending stays within your SWR. I don't see any particular advantage to separating out cash into buckets if overall spending stays below/within budget. I think buckets may be helpful for people who tend to spend above their means (or who spend way too much in certain categories) who need the artifice of a "bucket" to cap their spending.

 

[audreyh1]

When I do my January withdrawal I set aside the money needed to pay federal taxes due during the year which includes estimated taxes. The remainder is what we can spend however we wish.

All the funds are in high yield savings accounts. I send funds each month to our main bank checking to cover most expenses. The occasional lumpy expense such as travel simply draws more as needed.

Works this way for me for many years now.

 

[Flyfish1]

All good suggestions - I was starting to drive my wife crazy and also myself.
I want to keep it as simple as possible going forward. Still very much in the adjustment phase...thanks

 

[audreyh1]

Sounds like you just need to track a budget so that you make sure the fixed/expected expenses are covered.

Once you get used to your cash flow you may not need to be so careful.

 

[jazz4cash]

I am probably overthinking this. Thoughts ?

Thanks

Overthinking, yes. Not too sure about the term “pre-filled”. To my way of thinking a bucket is useless unless it is filled. I do use something like a bucket system but it’s more like a ladder with a bucket for near term expenses. M

 

[COcheesehead]

I preflight my cashflow in Excel. If what is expected to come in is more than what I “guess” I’ll spend, I sell nothing and let things ride for the year.
I usually come in well under. We live off interest exclusively.

 

[Koolau]

So, I just retired 6 weeks ago and I pre filled one year ahead several " buckets" . Meaning cash designated for certain items, like real estate taxes, HOA fees and the big one, travel. My original thought was to always maintain one year ahead of these pre filled buckets. But, now I am questioning the logic of that. By doing so, I am creating yet another cash reserve, when I already have a cash reserve account. At present money market rates , that ain't so bad, but that will change.

Money comes in every month or every quarter so why set aside a whole year in advance? Some expenses have clear due dates, like the HOA and real estate taxes so planning for that expense is easy. Travel of course has a budget per year , but the timeline is more flexible.

I am probably overthinking this. Thoughts ?
Thanks

Try it for a while (test it out) and go from there. You'll get the hang of it in no time.

 

[PERSonalTime]

So, I just retired 6 weeks ago and I pre filled one year ahead several " buckets" . Meaning cash designated for certain items, like real estate taxes, HOA fees and the big one, travel. My original thought was to always maintain one year ahead of these pre filled buckets. But, now I am questioning the logic of that. By doing so, I am creating yet another cash reserve, when I already have a cash reserve account. At present money market rates , that ain't so bad, but that will change.



Money comes in every month or every quarter so why set aside a whole year in advance? Some expenses have clear due dates, like the HOA and real estate taxes so planning for that expense is easy. Travel of course has a budget per year , but the timeline is more flexible.



I am probably overthinking this. Thoughts ?

Thanks

I did and do exactly the same thing. It has worked for me for 8 years. The money for those expenses are always there, so I never have to worry about those expenses.

 

[DrRoy]

I have a cash account for the current year's spending, but I don't do buckets.

 

[rk911]

Up until a few years ago we had a number of 'buckets' or sinking-fund virtual accounts. But when our net worth reached and exceeded our definition of 'critical mass' we discontinued that practice. In reality we could've ended that practice several years earlier but....

 

[PatrickA5]

I have one giant cash bucket currently all in MM account (outside our IRA's). I move a few grand over to our checking account as needed.

Back in my accumulation days, I had separate buckets (accounts) used for different things. It worked well. I don't have a need to have that complexity anymore.

 

[RBDan]

Timely topic for me. I am getting ready to start living on my investment income and what I am thinking about doing is...

1. Transfer enough cash to cover my yearly expenses to SWVXX (Schwab Money Market @ 4.95%)

a. Then I will transfer my "paycheck" every 2 weeks to my Schwab checking account​

b. With our lumpy expenses (property tax and insurance), I will either leave in SWVXX or most likely transfer it to my Schwab savings account to eliminate any confusion and to simplify tracking​

2. Then transfer vacation/fun money to separate brokerage account for my wife to invest in SWVXX or CDs. She had the good idea to not commingle fun money with the money we will use to pay the bills and I had the good idea for her to get more involved with investing.

 

[TheWizard]

Sounds like OP is overdoing it a bit.

I have monthly retirement income but don't do "buckets".
What I do is target to keep $10,000 in my checking account. Extra income beyond that gets moved to my taxable investment account and invested into stock index funds eventually.

I've had some big expenses in the past few weeks and I'm well below my $10k target presently. But my next SS payment and RMD payment should get things back to normal...