How the Plan Comes Together
A few hypothetical illustrations of how the Bucket Strategy and the Beacon 360 Process can be applied to real-life retirement situations. Each is an educational example — not a promise of results.
Pre-Retiree, Age 60
Preparing to retire in about three years — worried about a bear market, and yet also needing to keep up with inflation over a long retirement.
Retirees, Ages 65 & 64
Maintaining their lifestyle while preparing for the “Widow’s Tax Penalty” — and creating reliable income from a portfolio that fluctuates with market swings.
Retirees, Age 70
Sold a business — and use their pre-RMD years and Roth conversions to lower lifetime taxes and simplify income.
Pre-Retiree, Age 60
Steve (60) & Cindy are three years from retirement. Steve is the natural worrier — he tracks account balances closely and feels he needs a few more strong years in the market before he can feel okay about retiring. Cindy’s concern is quieter and more practical: whether their money will still buy the same life years from now.
Retire in about three years with income they can rely on — income that keeps arriving even if a bear market shows up at the wrong time, while still keeping enough of the portfolio growing to keep up with inflation across a long retirement.
Underneath the numbers, the real goal was emotional as much as financial: to be able to live through a difficult market without it turning into a difficult decision.
- Two opposite risks at once: the Bear Extreme — a downturn arriving early in retirement and forcing the sale of assets that are down — and the Inflation Extreme, the slow erosion of what each dollar buys (the five-dollar cup of coffee that may cost close to eight dollars in fifteen years).
- Arguing the same point from opposite sides: Steve wanted everything aggressive to outrun inflation; Cindy worried the money they’d need soon could be caught in a downturn. Both were right about a different part of the problem.
- The emotional weight of uncertainty: knowing intellectually that markets have historically recovered is not the same as feeling okay while headlines say otherwise.
- Separate income by time horizon: different dollars were given different jobs based on when they would be needed, rather than forcing one portfolio to do two conflicting jobs at once.
- Bucket One (Years 1–5, the “Now” bucket): near-term income kept safe, liquid, and out of the market entirely — where a bear market cannot reach it. We never take income from a growth asset.
- Bucket Two (Years 6–10, the “Soon” bucket): held in a fixed-income allocation, one step behind Bucket One.
- Later buckets (Years 11+): given a longer runway and a more growth-oriented posture, so time — not market timing — does the work of keeping up with rising prices.
- Annual strategy review (the Protect Phase): a standing yearly check-in to confirm which dollars are for the next few years, which are for the next several decades, and that those assignments are still current.
- Steve retired and the plan was built — Bucket One funded and intact, the later buckets pointed toward growth.
- When the 2022 bear market arrived (the S&P 500 declined roughly 24% over that stretch, cited here as historical context), Bucket One did not decline, because it was never in the market — and the monthly income arrived every month, January through October.
- Bucket Two, in its fixed-income allocation, was effectively untouched by the decline.
- A later bucket did fall in value — but it had roughly six years (about seventy-two months) before its dollars were needed, longer than a typical historical recovery, so the decline had time to be temporary rather than forcing a sale at a low.
- The review turned a frightening year into a non-event: a bad market did not become a bad decision.
Retirees, Ages 65 & 64
Jim spent more than twenty-six years as a structural engineer, designing bridges built to hold under load. He and Donna approached their retirement plan the same way he approached everything — stress-tested for the scenario most couples avoid looking at directly. Jim’s deepest concern was never the market. It was making sure that, if he was gone first, Donna would never have to face the plan — or the tax code — alone.
Build a retirement income plan that does two jobs at once: keep income flowing reliably no matter what the market is doing, and protect the surviving spouse.
Jim wanted the plan engineered so that if Donna ever had to walk the bridge alone, the income would continue uninterrupted — and the Widow’s Tax Penalty (the “Double Squeeze”) would already have been planned around before it ever arrived.
- The Double Squeeze (Widow’s Tax Penalty): when the first spouse dies, income drops and taxes rise at the same moment — the smaller of the two Social Security benefits stops permanently, while the survivor’s filing status shifts from Married Filing Jointly to Single, roughly halving the bracket thresholds.
- A sizable pre-tax IRA pointing to higher future RMDs — and larger forced taxable income for a single filer.
- Deciding which accounts to draw from, and in what order, across a tax landscape that would change permanently at the first death.
- A narrow, time-sensitive “December window”: in the year of a spouse’s death, certain tax moves must be completed before year-end while joint filing status still applies.
- The Roth foundation: both held small Roth IRAs opened in their mid-fifties (past the five-year threshold), giving Donna a source of tax-free withdrawals to manage her bracket later.
- Six years of paced Roth conversions: each year, converted up to the top of the 12% bracket without crossing into 22% — helping lock in the lower rate and steadily shrinking the pre-tax IRA and future RMDs.
- Account sequencing (IRA first, non-qualified second): counterintuitive, but across the full arc of retirement it left the survivor in a stronger position than protecting the pre-tax account first.
- QCD readiness (70½+): charitable giving structured as Qualified Charitable Distributions to satisfy part of future RMDs without increasing AGI.
- The December window conversion: in the year of Jim’s passing, one final conversion at joint (12%) rates — a move that would have cost roughly 22% one month later as a single filer.
- Bucket Strategy already running: near-term income held safe and liquid in Bucket One, outside the market, so income was never drawn from a growth asset — and kept arriving on schedule.
- Income never stopped — it kept arriving from Bucket One, safe and outside the market, uninterrupted and unaffected by market conditions.
- Six years of 12%-bracket conversions helped lock in a lower lifetime tax rate and reduce future RMDs, cushioning the Double Squeeze before it arrived.
- The year-of-death December conversion captured joint (12%) rates one last time — roughly half the tax cost of the same move a month later as a single filer.
- Roth assets gave Donna flexibility to manage her tax bracket as a single filer in the years ahead.
- Positioned for a more tax-efficient legacy to their children (larger Roth balances; taxable assets may receive a step-up in basis under current law).
Retirees, Age 70
David (70) & Karen (70) are retired and want steady, after-tax income with less tax drag — and a simpler, consolidated portfolio — before RMDs begin at 73.
Create a coordinated, tax-smart retirement income plan that consolidates all their accounts, lowers future RMDs, manages Medicare IRMAA, and supports their giving.
David and Karen also want to keep the majority of their assets invested for long-term growth — a legacy for the next generation — without watching the market every day or worrying that a downturn could disrupt the income they live on.
- Significant pre-tax IRA balances pointing to higher RMDs at 73.
- Accounts scattered across multiple institutions; hard to rebalance and plan withdrawals.
- No clear withdrawal order (taxable vs. IRA vs. Roth), making AGI unpredictable.
- Wanting to stay invested for growth while not depending on those same investments for day-to-day income.
- Consolidation & simplification (both spouses): Combined old IRAs/401(k)s to tighten control over rebalancing, withdrawals, and future RMDs.
- Gap-years Roth conversions (ages 70–72, MFJ): Converted each year up to the top of a targeted bracket (e.g., 22%/24%) to shrink pre-tax IRAs before RMDs start at 73.
- IRMAA management (per spouse): Modeled the 2-year Medicare lookback and timed conversions/capital gains to keep most years within targeted tiers.
- Withdrawal order: Sequenced IRA → taxable → Roth — drawing down pre-tax balances first to help reduce future RMDs, while leaving Roth assets to keep compounding for legacy.
- Asset location: Positioned the more aggressive, higher-growth holdings inside the Roth account, where future growth can compound tax-free for David, Karen, and their heirs.
- Bucket Strategy (five-year buckets): Set aside near-term income in five-year buckets so income is never taken from a growth asset — allowing the majority of the portfolio to stay invested for long-term growth even when markets decline.
- QCD setup (70½+): Established Qualified Charitable Distributions so future RMDs can be satisfied without increasing AGI.
- Lower first-year RMDs at 73 vs. a no-conversion baseline.
- Reduced estimated lifetime taxes with smoother, more predictable after-tax income.
- Fewer projected IRMAA years due to paced conversions and withdrawal sequencing.
- Near-term income drawn from buckets rather than growth assets, so a market decline does not force selling investments that happen to be down.
- Potentially more tax-efficient assets passed to beneficiaries (larger Roth balances; taxable assets may receive a step-up in basis under current law).