Pioneer Press: The Money Matrix Approach for Sustaining Retirement Income
3 minutes
Planning for retirement isn’t just about saving; it’s about creating a strategy that can deliver dependable income for decades. However, many investors fall into the trap of trying to predict market movements, adjusting their portfolios based on short-term forecasts. Instead of guessing, Wealth Enhancement developed the Your Money Matrix™, a framework designed to help you visualize how your assets can generate sustainable cash flow throughout retirement, without relying on market timing or speculation
How does Your Money Matrix™ work?
The Your Money Matrix™ approach begins by determining how much sustainable cash flow you will need to generate each year from your retirement assets. It should reflect your goals for how you want to spend your golden years. It’s also designed to give you confidence that your savings are structured to meet your goals.
To set up your portfolio using the Your Money Matrix™ approach, start by visualizing a square divided into nine sections, similar to a tic-tac-toe board. Across the top (horizontal axis), label the three columns to represent how your investments are taxed. On the left side (vertical axis), label the three rows to show the timeframes when you’ll need access to your money.
Your Money Matrix™
| Taxable accounts | Tax-deferred accounts | Tax-advantaged accounts |
Short-term |
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Medium-term |
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Long-term |
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Remember that your household balance sheet or net worth statement doesn’t typically reflect a critical factor in retirement income — tax liabilities. Most people accumulate the bulk of their retirement assets in their tax-deferred IRA or 401(k). However, this creates a significant tax liability in retirement, as withdrawals from these accounts are taxed as ordinary income. As you consider the cash you’ll need in retirement, think about how your various accounts are taxed, and devise a tax-diversification strategy to maximize the efficiency of your spending decisions.
- Taxable accounts: These are brokerage and other liquid accounts with realized capital gains and income is taxed at year-end, usually at rates that are lower than those levied on ordinary income.
- Tax-deferred investment accounts: With tax-deferred accounts, you pay no tax on accumulation in your IRA or 401(k) today, but distributions are taxed as ordinary income in the year they are withdrawn. Plus, withdrawals made before age 59½ are generally subject to a 10% federal penalty.
- Tax-advantaged investment accounts: No tax deduction is available to contributions to a Roth IRA or Roth 401(k) account, but earnings accumulate tax-free, and withdrawals can be tax-free.
Here’s what each timeframe on the vertical axis of Your Money Matrix™ represents:
- Short-term: In the short-term bucket, you’ll want to set aside an emergency fund of three to six months of income to cover large, unexpected expenditures such as a new furnace or roof, or for a medical procedure that’s not covered by insurance. The short-term bucket should hold mostly risk-hedging assets, such as cash and Treasuries. The purpose of this bucket is not to grow — it’s to give you greater certainty that your cash needs will be met over the next few years. A secondary benefit is reducing the impact of short-term market volatility on your portfolio.
- Medium-term: For the medium-term “buffer” bucket, you’ll want to earmark money for intermediate financial needs such as contributing to your kids’ education, paying down a mortgage, or starting a part-time business. The medium-term bucket holds income-generating investments, including low-risk, low-volatility stocks for stable capital gains. Doing this may help you avoid the common problem of having to sell growth-oriented assets on short notice. The medium-term bucket can also serve as a buffer between the short-term bucket and the long-term bucket and can be used to “top off” the short-term bucket as needed.
- Long-term bucket: The remainder of your portfolio can be allocated to a long-term, growth-oriented bucket that is aligned to your values and long-range financial needs — whether it’s to cover significant long-term health care costs, to leave a legacy for your children or other heirs, or philanthropic purposes. The long-term bucket generally should hold growth assets, such as stocks. Although stocks can be more volatile in the short term, they historically have been able to sustain an investor’s portfolio in the later years of retirement. Assets in the long-term bucket can be also used to replenish the short- and medium-term buckets as needed.
When developing a distribution strategy aligned with a client’s financial goals, we often recommend drawing from multiple asset “buckets” over a multi-year period. This approach is tailored to the client’s cash-flow needs, current and expected future tax rates, and the timing of anticipated expenses. Importantly, it reduces reliance on short-term market predictions, which are difficult—if not impossible—to forecast consistently.
The original article was published by Pioneer Press. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. #2025-10293