What is the retirement savings waterfall?

1 min readLast updated November 20, 2023by Lisa-Marie Voneshen

This article takes you through exactly what a retirement savings waterfall is and how you can use it to plan your retirement.


  • A retirement savings waterfall is a financial planning technique that allows you to prioritize your financial goals ahead of retiring.

  • It should help you make the most of your savings and investments.

  • Each person's ‘waterfall’ will look different depending on their unique goals and circumstances.

  • Speak to a financial advisor about getting ready for retirement.

What is a retirement savings waterfall?

A retirement savings waterfall is a financial planning technique that allows you to prioritize different financial goals by allocating money into various ‘buckets’ based on your goals and timescale.

Originating in the US, a savings waterfall should help you prioritize your savings and allocate your money toward hitting your financial goals.   

If you need help getting ready for retirement and don’t know where to start, we can connect you to a financial advisor perfectly suited to meet your needs and help you plan the perfect retirement. Find out more here.

How do I create a savings waterfall?

How your ideal ‘waterfall’ will look depends on your financial goals and personal circumstances.  

The below tips should help you make the most of your savings and investments.  

1. Create an emergency fund  

The priority in a savings waterfall is typically to establish an emergency fund. This fund should cover unexpected expenses or financial emergencies, such as medical bills or unemployment.  

It is recommended that you save three to six months' worth of living expenses in an easy-to-access account. 

2. Pay off your debts  

Your debt is the hole in the bucket, as interest on your borrowing is likely to be greater than the interest from any savings and investments. 

It’s not worth putting your money in a savings account with 4 percent interest if your debt has a 7 percent interest rate. In this scenario, paying off your debt first is a good idea.  

3. Establish short-term financial goals  

Once you have established your emergency fund and paid off your debt, the next step is to save for short-term goals that you plan to achieve within the next one to three years. 

These goals might include saving for a holiday, purchasing a new car, or even making a down payment on a house. 

It’s worth considering putting money into a separate savings account or investments that match the timescale and risk tolerance for these goals. 

4. Set medium-term goals  

After addressing your short-term goals, you can focus on saving for the medium-term goals you plan to achieve in three to 10 years. 

These goals may include saving for a wedding, home renovations, or funds to start a business.  

5. Plan ahead for long-term goals  

The next step in the savings waterfall is to allocate funds towards long-term goals, such as retirement savings. 

Contributing regularly to any retirement fund, such as a 401(k), is important to ensure long-term financial security. 

You should take advantage of any matching contributions from your employer or tax advantages available with retirement accounts.  

6. Make additional investments  

Once you’ve set up your emergency fund and set aside money for any short, medium, and long-term goals, you may want to put additional savings towards other investment opportunities.  

This may include investing in stocks and shares, bonds, property, or other asset classes based on your risk tolerance and investment preferences.  

By using a savings waterfall, you can prioritize your savings goals and ensure that you allocate your funds in a way that aligns with your financial goals.

It's also important to regularly review and adjust your savings strategy, as your goals and circumstances may evolve over time.  

Unbiased can match you with the right financial advisor that’ll look at your personal circumstances and financial goals to help you make the most out of your money.

Senior Content Writer

Lisa-Marie Voneshen

Lisa-Marie Voneshen is a Senior Content Writer at Unbiased. She is an award-winning journalist with nearly a decade of experience writing and editing content across various areas, including personal finance and investing.