retirement asset allocation

Designing a Retirement Asset Allocation for Safety, Growth & Income for Life

An Examination of ‘Bucket #1’ and How to Fill It

The following article features an excerpt from Momma’s Secret Recipe for Retirement Success, by Dan Ahmad, Jim Files, and Jack Canfield. Get your copy here!

In our book, Momma’s Secret Recipe for Retirement Success, we discuss “The 7 Rules To Live By For Retirement Security,” some of which we have also written about on this blog and you can find linked below:

  1. Avoid Large Losses – Use the 5%-10% Rule
  2. Minimize Fees
  3. Significantly Reduce Volatility
  4. Earn a Reasonable Return Rate
  5. Manage Taxation
  6. Generate “Certain Income” from Your Assets that Will Last for as Long as You Live
  7. Have a Written Retirement Income Plan

If you are like most retirees, you probably love the idea of having a “Retirement Planning Roadmap” like this, right? It’s designed to help you plan for retirement income you can count on – for life.

A Retirement Reality Check

Here’s an important reality: One investment alone will not allow you to follow “The 7 Rules To Live By For Retirement Security.” You can only receive the benefits of following all seven rules if you have an actual plan that ties everything about your money together and if you use what we call the “3 Bucket Safe Money Approach.”

If you are serious about your financial security, your next question is probably, “OK, I really like the idea, but how do I implement it?” So, let’s discuss the “3 Bucket Safe Money Approach” in a way that asks you to imagine the 3 Buckets as a pie chart; an allocation of assets chart. The most important thing to know about our pie chart is it is not just a bunch of mutual funds crammed into one pie, with a lot of the mutual funds behaving similarly. The pie chart we want you to imagine has three separate and distinct sections (buckets) that all act differently, but in concert with one another to help you meet your goals.

First, we determine the amount of income you need for the rest of your life and allocate the assets to Bucket #1 required to produce this amount of income. Second, we determine how much liquidity you need and allocate the assets required to Bucket #2. And third, we determine how much growth you want and allocate the assets required to Bucket #3.

Today, we’ll dive deep into Bucket #1.

SEE ALSO: Adjusting Your Retirement Mindset

Filling Bucket #1

For Bucket #1 we have to create a high level of income that is guaranteed to be paid to you for as long as you live. We use contractually guaranteed insurance products that are called fixed index annuities with income riders. We use A rated insurance companies that have been operating since before the Great Depression, with these companies keeping all of their financial guarantees and promises to their contract owners even through the worst economic time period the United States has ever been through.

And we know, we just used the bad “A-word” called annuities, which is a dirty word to a lot of people because you’ve heard bad things about annuities. Some of the bad things you have heard about annuities may actually be accurate when you are talking about variable annuities. Variable annuities may not provide principal protection against stock market losses, and they can carry annual fees as high as 6.5%. So, we agree, variable annuities may not be for you. When you hear bad things about annuities, in the majority of cases, someone is probably talking about a variable annuity. But let’s look at how a fixed index annuity with an income rider works.

Fixed Index Annuities with Income Riders

Fixed index annuities with income riders are specifically designed to:

  • Guarantee you won’t lose any principal from stock market losses. If the stock market crashes -53.8% like it did in the 2008 Financial Crisis, you would lose 0%.
  • Provide you income guaranteed for as long as you live, and if married, for as long as your spouse lives. Some plans allow for immediate income (within 30 days) while many plans allow income after 12 months. While income can start immediately, you can’t take all of your principal out for a certain time period without paying a premature withdrawal penalty (like a CD).
  • Even if you live past life expectancy and use up all the assets in your fixed index annuity with an income rider, and your account value goes to $0, you will still continue to receive the same income for as long as you live. You can’t outlive your income!
  • Guarantee you won’t lose any of your current or future gains from stock market losses. For example, if you earn a hypothetical 6% rate of return for five straight years and then the market crashes -50%, 100% of your original principal is protected from losses and 100% of all the gain you made during the five years is protected. What you earn can’t be lost.
  • Potential competitive growth rates from a low-risk asset. What does “competitive” mean? It does not mean stock market rates of return. If you want to earn stock market rates of return, you must be willing to take stock market risks. The stock market, as measured by the S&P 500 Index, grew by +19% in 2017, which was a great year. But if you wanted the opportunity to earn +19% in 2017, you had to be willing to take the same -53.8% risk the stock market lost in the 2008 Financial Crisis. In 2017 when the stock market grew by +19%, the return goals for some fixed index annuities with income riders would have been between +8% to +12%, without principal risk. So, the +8% to +12% return goals were competitive, but they were short of the +19% the market earned, and there is no guarantee the funds will grow at all.
  • Allows the assets to grow income tax-deferred until you take distributions. Unlike a portfolio of mutual funds, stocks, and bonds, all annual gains are not reported on your tax return if you are not taking distributions.
  • Provide the opportunity for future income increases either through guaranteed increases by deferring income or with potential annual increases based on index performance.
  • Carry low fees. The typical total annual fee for a fixed index annuity with an income rider is between 0% to 2%, with the average being right about 1%.
  • Passes 100% of assets remaining in your account when you die to your beneficiaries; the insurance company does not keep your money.

So, if fixed index annuities with income riders actually did all of these things, would it be a good place to put some of your retirement assets? In many cases, it would.

Would the word “annuity” be a bad word or a very good word? Seems like a pretty good word now.

Should you put all of your money in a fixed index annuity with an income rider? Definitely not, because you will have a surrender penalty for a certain time period.

SEE ALSO: Use the Correct Process for Financial Success

Understanding What Bucket #1 is NOT

You put the portion of your assets into a fixed index annuity with an income rider that you want immediate or future guaranteed income from and that you want 100% principal protection from all stock market losses. It’s important to understand that fixed index annuities with income riders are not designed to:

  • Give you 100% liquid access to all your funds starting immediately.
  • Give you 100% of the stock market upside and gains.
  • Be used as a short-term asset alternative.

Why the 3 Buckets are Important

The 3 buckets can be used to create a powerful plan for you, and it all starts with Bucket #1. If you’re interested in learning more about Buckets #2 and #3, we’ll dive deep in future blog posts. You can also grab your copy of Momma’s Secret Recipe for Retirement Success, right here! We cover the three buckets extensively, as well as a plethora of other topics to help you plan the secure retirement of your dreams.

Are you ready to get started protecting and preserving your retirement today? Contact us today. At Peak Financial Freedom Group, we believe it’s important to feel you have control over your future. We look forward to helping you achieve the financial independence you desire.


This information is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any financial product. This information is not mean to be relied upon as actual financial or tax advice. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views at Peak Financial Freedom Group, LLC and its affiliates. None of this information is intended to give you specific tax, investment, real estate, legal, estate, or financial advice. The planning and ideas in this data are not suitable for all individuals or situations. Consult a qualified financial professional before making any investment decision.
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Roseville, CA 95661


All presentation data is provided and intended to be used for general educational purposes only and is not intended as a solicitation for you to buy or sell any financial product.  By contacting Peak Financial Freedom Group, you may be offered additional information regarding the purchase of financial products. None of the material presented is intended to give you, nor are the presenters engaged in giving you, specific tax, investment, real estate, legal, estate, retirement, or financial advice, but rather to serve as an educational platform to deliver information; nor is it intended to show you how the strategies presented can specifically apply to your own tax, investment, estate, financial, or retirement position, but rather to offer an idea of how these principles generally may apply. Consult with a qualified investment, tax, legal, and/or retirement advisor before making any decisions.

Stocks, bonds, or mutual funds have risks and can lose principal, even with a stop loss, and there are no guarantees of gains, as past performance is not indicative of future positive investment results. Hypothetical examples are used to explain concepts and are not indicative of potential results you could receive. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund a new portfolio and/or annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. You can’t invest directly into a stock market index. A fixed index annuity with an income rider can protect your savings from losses and provide you guaranteed lifetime income, but you could incur surrender charges, gains aren’t guaranteed, you’ll pay a fee, and guarantees are backed by the financial strength claims paying ability of the issuing annuity company. If you place assets under management with our firm, we receive advisory fees for assets you place under management and commissions from insurance companies you buy products from. Seminars, radio shows, TV productions, book releases, magazine and book promotions are sponsored, promoted and paid for by Peak Financial Freedom Group, LLC.

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2019(1), 2020(2), and 2021(3), Five Star Professional Wealth Manager Award - Dan Ahmad and Jim Files have been nominated for and have won the 2019, 2020, and 2021 Five Star Wealth Manager awards. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Once awarded, wealth managers may purchase additional profile ad space or promotional products. Award does not evaluate quality of services provided to clients. The Five Star award is not indicative of the wealth manager’s future performance. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Award winners represent an exclusive group of wealth managers who have demonstrated excellence in their field by satisfying 10 objective selection criteria. For additional information on the Five Star award, including a complete list of the 10 objective selection criteria and their research/selection methodology, go to https://fivestarprofessional.com.

Investment advisory services are offered through Fiduciary Solutions, LLC, a Registered Investment Advisor (CRD #148118). Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA License #0N14013). Peak Financial Freedom Group, LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control. Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1620449) and is a licensed insurance producer with PFFG insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG insurance Agency LLC (CA Insurance License #0732913).

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