One of our advisors sat down with a client recently for her annual review. She'd been watching the market bounce around all year, and she had a simple question: "Should I just pull everything out and sit in cash until things calm down?"
It's a question we hear a lot. And the answer surprised her.
The Problem With Picking a Side
Most people think they have two choices when markets get choppy: stay in and ride it out, or get out and wait. Both feel risky. Stay in and you might lose money you can't afford to lose. Get out and you might miss the recovery that always, eventually, comes.
What makes this harder than it should be is that the financial industry talks about investments like you have to choose one approach. The industry often presents a false choice: total exposure to market swings or a total retreat to the sidelines. But that's not how retirement actually works. You don't need all your money doing the same job.
Three Buckets, Three Jobs
At American Retirement Advisors, we build income plans around what we call the three types of money. Each bucket has a specific purpose, and that purpose determines how much risk it should carry.
Yellow Money is your bank money. Checking, savings, easily accessible. This is your emergency fund. It's not trying to grow. It's trying to be there. One thing to keep in mind: cash sitting in a savings account earning 1% or 2% is quietly losing ground to inflation every year. With consumer prices still climbing in 2026, a savings account isn't really "safe" if it can't keep up with what things actually cost. That's exactly why Yellow Money should only cover your near-term needs, not your entire retirement.
Green Money is your guaranteed income. Think of it as a paycheck that never stops. Annuity contracts that pay you a set amount every month regardless of what the market does. Your principal stays protected. This is the money that keeps the lights on. Many of these contracts also include cost-of-living adjustments or increasing income riders, which means your paycheck can grow over time to help offset rising prices. That's your built-in inflation hedge.
Red Money is your growth money. This is where you participate in the market's upside. Buffered strategies let you capture market gains up to a cap while absorbing a portion of any losses. Let's be straightforward about the trade-off: in a year where the S&P 500 surges 25%, a buffered strategy with a 15% cap means you'd capture 15% and watch the rest go by. You trade away the possibility of capturing every last point of a bull run in exchange for a significant cushion against the downside. You're in the market, but you're protected.
For a lot of our clients, that trade-off is the thing that finally lets them sleep. The peace of mind that comes from knowing a bad quarter won't wipe out years of savings is worth more than chasing an extra few percentage points in a great year. And over a full market cycle, buffered strategies have historically kept pace with the broader market because they avoid the deep losses that take years to recover from.
A Quick Word About Taxes
Before you start moving money between buckets, it matters where that money is sitting. Rolling a 401(k) into an IRA to fund a Green Money annuity is usually a non-taxable transfer. But moving money from a taxable brokerage account into a new contract could trigger capital gains. And annuity growth inside a non-qualified account is taxed as ordinary income when you withdraw it, not at the lower capital gains rate. These details change the math. That's why we map out the tax picture before we move a single dollar. A good plan isn't just about what your money earns. It's about what you actually keep.
The client I mentioned earlier? She had all three buckets already in place. When she actually looked at her plan, she realized the volatility she was worried about only applied to her Red Money, and that bucket had downside protection built in. Her guaranteed income wasn't affected at all.
She kept her plan exactly as it was.
When Life Changes the Plan
The bucket approach works for market volatility. But it also becomes the foundation you lean on when life throws something bigger your way.
A client we worked with this year was dealing with a cancer diagnosis. Her concern wasn't just growth. She wanted to know her retirement savings could cover long-term care if she needed it, without draining everything she'd built.
We split her 401(k) rollover into two pieces: one into a guaranteed income contract with long-term care provisions, and one into a buffered growth strategy through a custodian she already trusted. Two jobs, two buckets, one coordinated plan.
What You Can Do This Week
Pull up your most recent statements and ask yourself: does every dollar in my portfolio have a clear job? If you can't point to which money is for income, which is for growth, and which is for emergencies, that's worth a conversation. You don't need to overhaul anything. You just need to know whether your plan matches how you actually want to live.
That's literally what we do at American Retirement Advisors. Give us a call. No pitch, no pressure. Just a conversation about whether your money is organized the way it should be. (877) 220-1089
Easy Eddie's Quick Checklist
Before your next review, pull out your statements and run through this. Takes five minutes.
- Yellow Money check: Do you have 6 to 12 months of living expenses in cash you can reach tomorrow? Too much more than that and inflation is eating your lunch.
- Green Money check: Can you cover your non-negotiable bills (housing, food, insurance, utilities) with guaranteed income alone, without touching your investments? If yes, market dips become a lot less scary.
- Red Money check: Does your growth bucket have downside protection? And do you know what the cap is? If not, ask. You deserve to know exactly what you signed up for.
- Tax check: Do you know whether each account is pre-tax, after-tax, or Roth? That changes how much of every withdrawal you actually keep.
If you checked all four, you're in better shape than most folks I talk to. If you couldn't answer one or two, that's not a problem. That's just your next conversation with the team at American Retirement Advisors. (877) 220-1089