Retirement Income “Bucket Strategy”

After the 2008 market correction, the "bucket strategy" gained more notoriety with financial advisors and planners because it is designed to match your retirement income need with risk. Between January 2008 and February 2009, the average retirement account lost more than 35%. Many investors were drawing a monthly income from a rapidly depreciating asset and had all their eggs in one basket, so to speak.

For instance, if your household needs $30,000 in the next year for housing, utilities, bills, etc., this might represent "bucket number one" and may be better suited for a money market account. This bucket keeps retirement monies tax deferred and allows from Federal and State income tax to be withheld from your Gross Distribution.

Bucket number two might be representative of retirement years two through five. This would represent four years of household expenses (or $120,000 using the example above). In this case, it may be prudent to have this money invested in bonds and large company dividend paying stocks.

Your third bucket would theoretically be for retirement years six through eleven and can have a slightly more aggressive investment objective.

A fourth bucket can be retirement years twelve through life expectancy and also have slightly higher risk attached to it.

The idea behind the bucket strategy is to keep the cash bucket (i.e., bucket number one) replenished using capital appreciation, dividends and earnings from buckets two, three and four. During market down-turns, the other buckets can be diversified accordingly.

Our bucket strategy helps clients find financial peace of mind and access money when they need it.

Note: Before investing in a mutual fund, carefully consider its investment objectives, risks, fees and expenses, which can be found in the prospectus available from the fund. Read the prospectus carefully before investing.