Investing Specialists

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

Christine Benz

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.