A few months ago, we shared thoughts on how to spend confidently in retirement without regret.
Today, we’re adding to that idea with a simple strategy: the “bucket” approach to retirement income planning.
What is the bucket strategy?
The idea is simple: instead of treating your retirement savings as one big pot of money, we divide it into time-based “buckets.”
- Near-term needs (0–3 years): Cash-like investments for everyday expenses (still earning interest).
- Short- to mid-term (3–7 years): Conservative investments for stability.
- Longer-term (7–25 years): Growth-oriented investments that have time to weather market ups and downs.
Capital Group’s chart below does a great job of showing five buckets that tie directly into the three timelines we emphasize: near-term, short- to mid-term and long-term:1
Why It Works
What makes this system powerful is how the buckets generally stay replenished over time.
As growth-oriented investments in the longer-term buckets mature, we gradually move a portion “down” to refill the nearer-term buckets. That way, you know your next few years of spending are covered—while the rest of your portfolio continues working for the future.
For Example:
Imagine you’ve spent down most of your 3–7 year conservative bucket. We’d replenish it by shifting gains from your 7–13 year growth bucket, helping to ensure the money you’ll need next is already set aside—without having to sell investments at a bad time.
It’s a structured, practical way to reduce worry about market swings while keeping your retirement income flowing. (Here’s more about our disciplined investment approach.)
Please reach out with any questions.
–David Bunker, Financial Advisor & Licensed Fiduciary
Before You Go
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This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.
Source:
1: Capital Group: The bucket approach to retirement income, https://www.capitalgroup.com/advisor/insights/articles/ir-bucket-strategy-putting-it-into-practice.html