When people discuss finances, it often sounds like they’re speaking a foreign language. How do savings and investments differ? Do we need to invest in stocks? Finance expert Pam Krueger leads this conversation with easy-to-understand explanations and tips for getting your financial life organized. Enjoy the show!

Author, TV show personality, and business owner Pam Krueger knows a thing or two about finances and the plight of women over 50 who want to be financially secure. She has several tips for women who want to make retirement as painless as possible for their pocketbooks.

Pam explains that even if a couple were to save $1 million for retirement, they will only get an income stream of $35-40,000 a year if they chose to invest safely at the current interest rates. This can be a very difficult amount to live on.  So, how do we increase our income after retirement?

Embracing the Bucket Strategy

Pam suggests thinking about your finances in terms of buckets. Everyone needs two buckets- one for now and one for later. These three simple steps will help you organize your buckets and achieve the financial security that you want.

Filling Bucket One

Bucket One is filled with the money that you know you need right now to live on and the money you will need to live on for the next two years or so. This bucket is not invested. Instead it is filled with cash in savings, checking accounts, and in cd’s that, unfortunately, get very low returns.

Because banks punish us for taking money out of cd’s before their term, it is important that our cash in Bucket One is not invested this way. It needs to stay really liquid so that it can be used when it is needed.

If you do decide that you want a little more interest on your savings, you can take small pieces and put them in a savings cd for six months then put another piece in a cd for a year. Then maybe one for two years. That way when the first one comes due, you will already have money there.

Filling Bucket Two

The goal is to have enough money in Bucket One to live comfortably and to start filling Bucket Two. This bucket will hold your investments that will continue to pay out throughout your retirement years.

While many women fear investments because they come with risk, Pam urges women to take a little more risk to get a higher rate. Even though the idea may seem scary, women can still feel secure knowing that their Bucket One is safe and will continue to meet their immediate needs.

The first thing you want in your Bucket Two is bonds that don’t have a maturity rate beyond two or three years.  You will also want longer-term cd’s that will bring a higher yield. Using some of this money on cd’s, to stagger it, is called “building a ladder of cd’s”.

The third item you want in your Bucket Two is dividend paying stocks. Many women think that they don’t need to be investing in the stock market when they’re in their 70s but if the money in Bucket Two is going to be significant enough to maintain the standard of living we’re used to, we must invest it to grow it.

Making Difficult Decisions

Many women struggle to fill Bucket One and see no hope in sight for filling Bucket Two. When they reach an age that they could retire, they have to make the difficult decision of continuing to work or retiring.

Pam suggests that you probably shouldn’t retire until you at least have a full year’s worth of after-tax savings sitting in Bucket One to live off of. You’ll be able to supplement these funds with your social security or pension payments.

If this combined amount provides you a standard of living that you are comfortable with, by all means, feel free to retire. But if you feel that these numbers won’t provide you with the security and financial freedom that you’re accustomed to, you may want to continue working a while to beef up those funds.

Some women find that they are emotionally and/or mentally worn down from their years of working. If you are tired of working full-time or tired of working for your particular company, consider working part-time, finding a different job, or even changing careers. Consultant work can be done world-wide and you will still be able to continue filling your buckets.

There are other ways to cut costs so that the amount you need in Bucket One can be lowered. If you have an empty nest, maybe you could consider downsizing your home. Maybe a couple can get by with only one car. There are many factors to consider when determining how much money is necessary to live on after retirement.

Have you organized your money into two buckets? Do you feel secure about your financial future? Would you rather work longer or live on less of an income? Please join in the conversation!