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Finding Quality Funds to Fill Your Buckets

Our screener tool can help retirees and those approaching retirement identify funds that fit different time horizons.

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Mention the idea of making a bucket list to many retirees, and it might conjure up images of an around-the-world cruise, hiking Mt. Kilimanjaro, or any number of life goals. But when it comes to investing strategies for retirees, a bucket list might also refer to a collection of funds used to structure a portfolio for the short, medium, and long term. 

For those who might be unfamiliar with the bucketing approach, Christine Benz, Morningstar's director of personal finance, provides a good overview in this article. The basic idea is to manage retirement savings based on when the money will be needed. Money to be used for living expenses in the coming year or two goes into the first bucket and is invested in low-risk securities such as Treasuries or short-term bonds. If desired, a mid-term bucket may be used for funds that won't be needed for another three to 10 years and which the retiree may want to expose to slightly more risk in exchange for a chance at slightly higher returns. Finally, a third bucket holds money that won't be needed for at least a decade and is made up of long-term investments--including equities--that have time to ride out any rough patches in the market.

Adam Zoll has a position in the following securities mentioned above: PRWBX. Find out about Morningstar’s editorial policies.