Your Retirement Paycheck: The Pots of Gold Strategy

Catherine Mathis |

This morning you went online and looked at your bank account to verify your paycheck deposited. And it did!  It is as regular as clockwork, twice a month.

Congratulations – you are retiring next month! No more getting up before the sun or answering emails at 9:00 p.m. to satisfy the boss. And….no more regular paycheck deposits. Wait, what?  Freak out!

Perhaps you’ve sold your business. Perhaps you have a pension that covers part of your work life income. There are numerous scenarios, and all share the conundrum of creating income for retirement.

You’ve done everything the right way: you have worked hard and saved hard. Your 401(k), 403(b), and IRA accounts are substantial. You have company stock, stock options, and a potential inheritance. You’ve got lots of resources. But how do you recreate the monthly paycheck?

Well, actually, how do you create a monthly paycheck that gives you a raise every year? Wait, the question is a bit more complicated. How do you create a monthly paycheck that gives you a raise every year AND does not run out before you die? Ahh ... that is a complicated task.

Following are five steps and the Berkeley Advisors’ solution.


Step One:  Define the Need

There are so many moving parts to consider. Where do you begin?

A planner can only help you if there is some idea of what you are trying to do. The real piece of the puzzle is not what your salary was, but what your spending needs are.

There are broad spending categories to consider. Each is highly personal.

  • How much do you spend each month to cover your lifestyle?
  • Then, what are your annual one-time expenses: insurance, property tax, trips, etc.?
  • What are your thoughts about potential large expenses to replace a car, extensive lifetime-type of travel, educate grandchildren, buy a second home, etc.?
  • Finally, at the end of a life well lived, what are your inheritance and charitable plans?

Take these four potential expense groups one at a time.

Start with your monthly income needs. Building a budget is the financial planner’s go to recommendation. If you have a budget you live by, you can probably answer this question quickly. In reality, if you’ve never been the ‘live on a budget’ type, then you need an alternative method to estimate expenses without spending hours going through statements.  Look at:

  • Withdrawals/checks from the bank account(s), excluding paying off credit cards
  • Charges on credit cards and all debt payments (mortgage, car, boat, etc.)

Look at several months and make an estimate. It is best to start with actual spending rather than a guesstimate.

A planner will build a plan using numbers you provide. It is in your interest to be conservative with estimates. Do not round down, which is to say, do not understate monthly spending. If you add up all your monthly expenses to find the total is on average $8,213 a month or $18,314 a month; do NOT round down to $7,000 or $12,500. It is best to start with what you actually spend and see how a plan would work. You may or may not need to consider your spending levels.

A caution: If the plan’s initial estimates are well below actual spending, the plan will fail. A planner can only rely on your information. Every financial planner has the experience of a client saying they can live on 50% of their prior work-life take home pay. The wise planner has the client test this theory.

Pull together a list of larger annual expenses you can’t just cover from the checkbook. These items can be property taxes, life insurance, annual vacation/trip, homeowner/renter insurance, tax prep fees, annual home maintenance contracts, etc. The idea is to make sure a planner has some idea of what it takes beyond your monthly costs.


Step Two:  Add Up Your Income

This step tends to take less time. Look at the regular income deposits you will have in retirement:


                        Social Security*


                        Buy-out payments if you sold a business

                        Investment Income:    Rent


                                                                Taxable investment account regular distributions

                        Perhaps a planned part-time or a seasonal position


*Social Security is an entire 25-volume book (just kidding) in its own right. At what age a person takes Social Security affects lifetime income. Being married, now or in the past, adds wrinkles to the calculations. The key here is to provide your planner with a recent Social Security statement for analysis.


Step Three:   What You Have Saved

The easy way to do this is get your most recent account statements. To build a retirement strategy a planner needs to know what you have saved for your retirement. They really need everything if the actual plan is to be useful. You may be astonished to learn that people do not always tell their planner about all of their investment accounts.

Certainly, include realistic inheritance expectations.

            Retirement accounts:   IRAs, ROTHs, work plans, deferred compensation

            The value of your home and a mortgage balance, if any

            Non-retirement accounts:   Investment Accounts, Savings/Bank average balance


Step Four:   Turn it Over to the Planner

Sit down with the planner and talk about retirement:

            How do you envision your retirement life to look over the next three years?

                        Not what the TV ads show but you want from retirement.

It is hard to think farther ahead than three years. You could be retired for three decades, who knows what can happen over that long a period? Asking you to plan several decades of your life is a bit like asking you to solve for world peace by year-end. Just step into retirement, and then life with all its opportunities will happen.

Now is the time to share your thoughts about two of the expense categories listed in Step One:

            Big expenses – how often to replace a car, or help with a grandchild’s education, etc.

            Your thoughts broadly about inheritance and charitable intents.

Michael Bloomberg said, “…and (I) have always said that the best financial planning ends with bouncing the check to the undertaker.”  In other words, your plan worked perfectly (though Mr. Bloomberg meant he planned to give all his money away).


Step Five:  The Planner’s Job

There are many solutions available to planners creating retirement income for you.  The planner’s job is to marry your ‘hard’ data to your ‘soft’ goals. ‘Hard’ data are the various numbers you came up with. ‘Soft’ goals are the ideas you shared about living in retirement and life goals.

The planner will also consider:            Risk and how you feel about risk



Social Security strategies

Pensions – and even pension buy-outs, if one is offered

                                                                  Types of investments and products supporting your goals

                                                                  Retiree healthcare and if you have HSAs

Longevity – how long could you live?

                                                                  Interest rates, market returns


A financial planner uses all these moving elements to build a retirement paycheck strategy. It is a giant puzzle with interlocking parts and dates. A plan must be flexible because you could be retired for decades, and a lot can happen over decades of time.


Your Solution:    The Pots of Gold Strategy©


The goal is to make a deposit into your checking account once or twice a month in the same way your paycheck used to deposit. Berkeley Advisors takes all of your information and all of the planning areas under consideration and builds the Pots of Gold Strategy© which is summarized in a sample version:




The solution to creating your retirement paycheck is to divide your resources into six Pots of Gold or POGs as we like to say it. And yes, we know, there is a POGS game out there. Like the POGS game we are playing ‘for keeps:’ that you can keep your lifestyle, keep your long-term plans, and keep what is yours. But ours is not a game for the consequences are too dear.

We individualize every POG Strategy. You may be younger or older than the average retiree; you may have a special needs spouse (memory issues) or child; you may have substantial charitable giving goals; you may want to work part-time for several years; you may want to travel extensively for two years before settling down; and…. The varieties of goals and Group plans are endless which is the fun part for us. Building individual strategies is a lot more fulfilling in serving clients than punching out look alike cookie-cutter plans.

Each POG in your Retirement Paycheck Strategy:

            Has a different goal;

Has a defined time-frame;

Is allocated actual dollars and investments; and

Sets specific goals which we will monitor.

The entire POGS is designed to let you see how we will manage to pay you over the years to come.


POG-1 is an Emergency Fund allocation.

Investments can be volatile. Just so you know – generally when an adviser says “volatile” it is code for markets dropping like a rock. Technically markets are volatile when they rise sharply but so far clients don’t complain when accounts go up in valueWinking face outline .  We want to protect against a sudden and sharp market dives, regular market drops, and actual emergencies you might experience.


POG-2 is the pot feeding you.

            This POG sends out the paychecks. Because POG-2 is responsible for creating regular income for you, it is conservatively structured. Once or twice a month, a distribution is made to send money to your bank and withholds for taxes. We have a plan for when POG-2’s funds are used and we replenish (see POG-3 below) it. POG-2 may fund the initial three years or five years. You will always have a POG-2 sending out money. That continuity is the whole point – creating your monthly paycheck.


POG-3 is teeing up to become POG-2.

            When POG-2’s money has been distributed to you, then we move to POG-3.  Well, actually, POG-3 becomes POG-2.  We will give POG-3 a goal. 

For example, POG-3’s goal could be:

                        In 5 five years, on May 1, 2025, we need $175,000 in POG-3 so we can pay you $2,500 a month for 6 years.  And that $2,500 a month will grow 2% each year to cover rising costs.  We have five years until we need the money. We can manage some investing here to grow to reach our goal of $175,000. 


POG-4, POG-5, and POG-6:  The Growth POGS

            Each of these three POGs has a dollar and date goal. On a set day in the future, the POG should have $xxx,xxx available so we can keep paying you that monthly paycheck.


The Pots of Gold Strategy© works best when reviewed every single year. Why? You’ll rest easier when we look at your strategy and realize, we are on track. Or if the investment environment is challenging, we can look at solutions to keep your regular paychecks coming. Maybe you’ve over-spent one year. Without that check-in you might not be as aware of the impact over-spending can have. Or better yet, you’ve not been spending as much as planned. We’ll have excess available in the plan if you are underspending. That scenario creates an opportunity for you to increase your income, take a lifetime trip, buy books for a grandchild in college, or….well, be creative. Lots of options are out there.

We design the POGS to give you control for the decades to come. We started by thinking just three years into the future; with each annual review we’ll evaluate our strategy to create that paycheck for years beyond the starting point. Your life will change, and we’ll adapt the plan.

The Employee Benefit Research Institute’s 2020 Study found only 42% of Americans have made an attempt at retirement calculations.  Fidelity Investments 2019 Retirement Mindset Study revealed that only 18% of Americans have created a comprehensive written plan for retirement.  Nine of ten people with a plan felt confident about retirement. Of the people without a plan, five in ten do not feel confident about retirement.

Retirement can last decades. Whether you like the Pots of Gold Strategy© as a retirement plan or want a different approach, do yourself the favor of putting some form of a plan in place. You do not get a ‘do over’ for retirement. Get a plan!


Live Fully Live Richly

This blog post is not offering investment or financial planning advice, tax or legal advice, or any form of specific suggestions/recommendations for the reader. Examples are just that – broad examples to illustrate a point. Please review the Disclosures Page for more information. 


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