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Investing Specialists

Implementing a Bucket System? There Will Need to Be Some Rules.

Your system for Bucket portfolio maintenance will have an impact on your portfolio's asset allocation and performance.

On paper, the Bucket strategy seems so simple and elegant: Set up the buckets and then spend your way through a long and happy retirement. Done and done, right?

Uh, not quite. As my recent series of bucket "stress tests" demonstrates, keeping a Bucket strategy up and running requires some maintenance. Without a set of guidelines about how you’ll manage your bucket portfolio on an ongoing basis, it can quickly run off the rails. Your cash bucket might not get replenished--or grow too large. Your portfolio could tilt toward a perilous weighting in stocks, or it could end up holding more safe securities than you intended, exposing you to shortfall risk.