Retirement planning isn’t just about growing your money—it’s about making sure your money is there when you need it, especially when the markets are being... well, a little dramatic.
That’s why we use what’s known as the bucket strategy for our clients who are approaching or already in retirement. Think of it like your own personal safety net, built into your portfolio.
What Is the Bucket Strategy?
Let’s break it down. For retirees (or anyone within about five years of retirement), we typically set up two separate IRAs:
- Bucket 1: This account contains dividend- and interest-producing stocks and bonds. These are the investments doing the heavy lifting, generating income.
- Bucket 2: This is your conservative, more stable account. Think of it as your “spending money” pot—the place your monthly retirement withdrawals come from.
Here’s the magic: the dividends and interest from Bucket 1 automatically flow into Bucket 2 every month. So instead of selling off investments when the market is down (which can lock in losses), you’re living off the income your investments are already generating.
Why This Matters (Especially During Market Turbulence)
Let’s rewind to early 2020. Remember the COVID market crash when stocks dropped so fast? It was unsettling for just about everyone.
But here’s what I got to do: I picked up the phone and called every client who was taking distributions and said, “You’re good. We’ve got your conservative pot of money already set aside. We don’t have to sell anything.”
That is the beauty of the bucket strategy. When the market takes a dip, your income plan doesn’t have to. You get to ride out the storm without changing your lifestyle or making emotional decisions with your investments.
Why We Do It This Way
This approach isn’t just smart—it’s strategic. It's confidence in a plan. And it's a huge part of why we do things the way we do them.
It lets us:
- Protect your income during downturns
- Avoid selling investments at a loss
- Keep your long-term growth strategy intact
Retirement should be a time when you enjoy your life, not stress about every market headline. The bucket strategy builds a plan that works with market cycles, not against them. It gives you income when you need it and lets the rest of your money grow when you don’t.
Want to see how it could work for your retirement? Let’s have a conversation. Because market dips happen, but stress about them doesn’t have to.