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Retirement Income that Lasts as Long as You Do!

Retirement Income that Lasts as Long as You Do!

March 20, 2024

Securing Your Retirement: The Bucket Strategy for Lifelong Financial Stability

One of the greatest fears that people in or near retirement have is the fear of running out of money. While there are many ways to alleviate this fear, there is a strategy that has helped many people retire in a way that helps them to generate a retirement income that lasts as long as they do. It is called the bucket strategy.

Retirement should be a time of relaxation, exploration, and enjoyment, but for many, the looming uncertainty of financial stability casts a shadow over this phase of life. The fear of outliving one's savings is a legitimate concern, especially as life expectancies continue to rise and healthcare costs soar. However, there are proactive steps that retirees can take to mitigate this fear and build a solid foundation for their financial future.

Enter the bucket strategy—a simple yet powerful approach to retirement income planning that has gained popularity among financial advisors and retirees alike. At its core, the bucket strategy involves dividing one's retirement savings into different "buckets," each designated for specific purposes and investment time horizons. By strategically allocating assets into these buckets, retirees can create a steady stream of income while also protecting against market volatility and inflation.

So, how does the bucket strategy work, and why is it effective? Let's delve into the key principles and components of this retirement income strategy.

Understanding the Bucket Strategy

The bucket strategy is based on the concept of asset allocation and cash flow management. Instead of relying solely on a traditional portfolio of stocks and bonds, retirees divide their savings into three distinct buckets, each serving a unique purpose:

  1. Short-Term Bucket: The first bucket, often referred to as the "cash" or "liquidity" bucket, contains enough cash or cash equivalents to cover living expenses for a predetermined period, typically one to three years. This bucket provides retirees with immediate access to funds without having to sell investments during market downturns.
  2. Medium-Term Bucket: The second bucket is comprised of conservative investments, such as bonds or bond funds, with a medium-term time horizon of three to ten years. This bucket serves as a buffer against market fluctuations and provides additional income while preserving capital.
  3. Long-Term Bucket: The third bucket is allocated to long-term growth investments, such as stocks or equity funds, with a time horizon of ten years or more. While this bucket carries more risk, it offers the potential for higher returns over the long term to combat inflation and sustain the retiree's lifestyle throughout their golden years.

Benefits of the Bucket Strategy

The bucket strategy offers several advantages for retirees seeking to generate a reliable income stream and preserve their savings:

  1. Risk Management: By segmenting their assets into different buckets based on time horizon and risk tolerance, retirees can better manage investment risk and minimize the impact of market volatility on their overall portfolio.
  2. Income Stability: The combination of short-term cash reserves and diversified investment holdings ensures a steady stream of income to cover living expenses, regardless of market conditions or economic downturns.
  3. Flexibility and Control: Retirees have the flexibility to adjust their spending and investment allocations as needed, allowing them to adapt to changing circumstances and unexpected expenses without jeopardizing their long-term financial security.
  4. Peace of Mind: Knowing that their retirement savings are strategically organized and protected against market fluctuations provides retirees with peace of mind and confidence in their financial future.

Implementing the Bucket Strategy

Implementing the bucket strategy requires careful planning and ongoing monitoring to ensure its effectiveness. Here are some practical steps to get started:

  1. Assess Your Retirement Needs: Determine your anticipated expenses in retirement, including essentials like housing, healthcare, and daily living costs, as well as discretionary expenses for travel, hobbies, and leisure activities.
  2. Determine Sources of Guaranteed Income:  Most people have some form of guaranteed income.  This can include Social Security, perhaps you have a pension or some source of rental income.  It is important to figure this out before you implement your bucket strategy.
  3. Allocate Assets Strategically: Divide your retirement savings into the three buckets based on your time horizon, risk tolerance, and income needs. Consider working with a financial advisor to develop a customized asset allocation strategy tailored to your individual goals and circumstances.
  4. Regularly Rebalance and Replenish: Periodically review and rebalance your portfolio to maintain the desired asset allocation within each bucket. Replenish the short-term cash bucket as needed and adjust your investment holdings to reflect changes in your risk tolerance or financial objectives.
  5. Stay Flexible and Adaptive: Be prepared to adjust your bucket strategy as life circumstances change, such as unexpected expenses, market fluctuations, or shifts in your retirement goals. Regularly revisit your financial plan and make necessary adjustments to ensure its continued relevance and effectiveness.


The bucket strategy offers a practical and effective approach to retirement income planning, providing retirees with a structured framework for generating sustainable income while preserving their savings for the long term. By strategically allocating assets into different buckets based on time horizon and risk tolerance, retirees can navigate market volatility with confidence and enjoy a financially secure retirement that lasts as long as they do. Whether you're approaching retirement or already enjoying your golden years, consider incorporating the bucket strategy into your financial plan to safeguard your future and achieve peace of mind in retirement.


If this is something you would like to discuss, reach out to me HERE. As always, thanks for reading.  KB