Investing Specialists

Bucket Portfolio Maintenance: There's More Than One Way to Get It Done

Christine Benz

The bucket strategy for retirement income appears to be a model of simplicity, at least on the surface. Simply segment your investment portfolio based on when you expect to need the money, slot in the appropriate investments for each segment, then happily harvest living expenses from your portfolio for the rest of your life (provided your withdrawal rate is sustainable, of course). The key premise of bucketing is that by maintaining a liquid pool of assets at all times--consisting of one to two years' worth of living expenses--a retiree can maintain a stable standard of living while also holding a diversified pool of assets that may undergo short-term fluctuations.