When it comes to your finances, retirement, isn't just an on, off switch that you can trigger at a certain age. There's some transition that really needs to happen before you get there. And today I just want to talk about one strategy that we've used with clients that has been really helpful in setting them up for success in retirement. So before I get started, I just wanted to introduce myself. My name is Warren Berger. I'm the owner of luminary financial advisors. We help people that are approaching or recently retired set themselves up for success with a financial plan and tax saving strategies so that we can alleviate some of the worry and stress that can go along with this transition. If you look in the common section below, I have a number of free resources that you can click on, hopefully that'll help you in your retirement journey as well.
So back to our original conversation, to talk about how we employ this one simple strategy with our clients to really set them up for success in the future. So as we're approaching retirement are 401k plans or whatever tax deferred vehicle that you're using. You know, you'll a lot of people will have investments in stock funds. They, they may be all in stock funds S and P 500 things like that. And what happens is, as you get closer to retirement, we're going from this accumulation stage to a de stage. So the mentality changes. So where we were concerned about getting the highest rate of return possible with our assets over time, we are now looking at, obviously we do want to get returns on our investments, but we also want to start to mitigate risk and we want to mitigate the amount of volatility in our portfolio.
So one of the ways that we do this and really kind of protects against downturns in the market, as people start to retire, when it can have the greatest effect detrimental effect on your retirement is by creating bucket strategy. And I have another video. If you look below where I really get into detail about what this bucket strategy is, one of the things that we like to do is make sure that we have a war chest available for our clients as they approach retirement. So that, that day that they decide to pull that trigger. And they're no longer accumulating funds within their, their 401k. We have the assets available to weather, any downturns in the markets before we'd have to sort start to dig into some of those stocks and potentially have to sell them at a loss to be able to come up with living expenses and what we find a lot with our clients as they've been accumulating, they've been investing in sort of more aggressive vehicles, possibly S and P 500 funds, or just generally a larger asset allocation to stock funds where we want a certain amount in cash certain amount in bonds.
And so one example that I had with the client is we found that when we did the assessment for their retirement needs, that we were about a hundred thousand dollars short in those conservative funds. And now he was investing he was doing his catch up contributions and in 2022, that's $27,000 a year, and he's three years from retirement. So you know, basically we, we said, listen, for the next three years, he has a 3% employee match. So we want to make sure that he gets that match, plus he's in a higher tax bracket. So we do want to make sure that he's still able to get that tax deferment for his money, but rather than invest in the S and P 500 fund that he had been investing in most of his assets we started to have him put it into the stable value fund in his 401k much more conservative, closely aligned with cash.
And we're going to have him do that over the next three years so that we can build up that war chest of cash that we want to have for a part of that bucket strategy that we're putting in place for their retirement. Some people may say, Hey, well, you know, what happens if I missed the returns in the market? And the fact is that I would rather take in this period of time, this transition where there's the most, most risk to a retirement is at the beginning of the retirement, that you start drawing funds in a down market with stock that you can't replace after you use it. So I would much rather take the chance that in this, this small amount of time, we're losing out on the potential returns in the market, then be in a situation where the market, we don't know what the market's going to do.
So we don't know if the market's going to go up or down. We do know over time, historically the market goes up, but we also know that there are sustained periods of time where the market can go down. And if that's a time that you're drawing funds from your retirement accounts, we want to draw that from cash rather than stocks. And so what we're going to do with him over the next three years is have him take his $27,000 a year, which will be going up with with the adjustments I'm sure. But we are going to apply that just to his stable value fund in his 401k, so that we're mitigating, that sort of gap that we saw in the conservative assets that he has. So that by the time he does retire in three years, we're pretty close to that cash allowance that we wanted to have.
And we can find other places in his investments to, to shore that up. One thing I do want to say is like, this is his particular situation. Your situation is likely going to be different, your needs for cash, what you're looking to do in retirement. So please don't take this piece of advice and just go out and run with it, make sure that you talk to your financial advisor, your CPA, or whoever it is in your life that really helps guide you with your financial decisions. But this is a great strategy. And, and it also leads to the idea that we need to start thinking about retirement. Well, before we're actually retiring. I have a a Facebook group called 10 years to retirement, and we really talk about a lot of these strategies of that we can employ it. And a lot of them can take place over years. And you want to just make sure that you are, as soon as you're starting to think in terms of retirement, that's when you need to start implementing a lot of these plans. So I hope that's helpful for you.
We do have those resources that I mentioned below as well. If you are interested in scheduling a one-on-one conversation with me at no cost, I'm happy to talk to you about your financial situation, potentially see if we're a fit to work together. And hopefully that's something that can be helpful for you in the future. So hope to see you again. Oh, and also, please, if you like this information, please subscribe or like the page so that we can get more people involved and more information out there. I hope you have a great day and hope to see you here again soon.