Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Jason Stipp and Christine Benz | 08-30-2012 03:00 PM

What to Drop in Your Buckets

Several low-cost, subadvised, and wider-ranging funds made Christine Benz's shortlist of investment candidates for retirees using the so-called 'bucket approach.'

Note: This video is being re-featured as part of Morningstar's 5 Keys to Retirement Investing special report. This video originally appeared in August 2012.

Jason Stipp: I'm Jason Stipp for Morningstar.

Christine Benz, our director of personal finance, has often talked about the "bucket approach" to retirement, a practical approach to help investors get their minds around how to deal with their portfolios in those golden years.

She recently on created a model portfolio to illustrate what kinds of investments might you use in the bucket approach. She is here with me to give a little more definition around those investments today.

Christine, thanks for joining me.

Christine Benz: Jason, great to be here.

Stipp: So, you recently did put out a portfolio, but before we get to the investment selection, I'd like to talk about broadly what types of investments you would look for in these buckets. What are the buckets supposed to do and how does that inform what you put in them?

Benz: There are lots of different ways to create these in-retirement bucket portfolios. The simplest form is simply where you've got your cash bucket set up for near-term living expenses, and then bucket number two, which covers everything else--so that's stocks, bonds, and everything else that you might own.

The way that I typically envision this bucketing coming together is actually three separate baskets or buckets of securities. Bucket number one is that cash, safe, liquid reserve bucket that is going to consist of cash instruments mainly or possibly even some sort of a short-term, very high-quality "quasi-cash, but not quite cash" fund that will give you a little bit higher yield, but generally keep your principal pretty stable. So that's what's going in bucket number one, and that typically will cover one to two years of your in-retirement living expenses, preferably two.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article