Bucket Strategy
A Balanced Approach to Retirement Planning
Retirees today are facing very different challenges than previous generations, including lack of pensions, uncertain future of Social Security, and higher health costs attributed to longer lifespans. The solution to these challenges is a lifetime income that maintains your purchasing power throughout your retirement years.
The Bucket Strategy is a retirement income planning method designed to manage your investments and withdrawals efficiently throughout your retirement. By segmenting your retirement savings into three distinct “buckets”, you can better match your investment risk with your income needs over time.
How It Works
Bucket 1: Short-Term Needs (Years 1-5)
- Purpose: Cover short-term expenses and immediate living costs.
- Investment Type: Cash, money market funds, short-term bonds, and other low-risk investments.
- Goal: Ensure liquidity and stability, minimizing the risk of needing to sell investments at a loss.
Bucket 2: Mid-Term Needs (Years 6-15)
- Purpose: Provide income for the middle years of retirement.
- Investment Type: Intermediate-term bonds, dividend-paying stocks, and balanced mutual funds.
- Goal: Achieve a balance between growth and income, with moderate risk and higher returns than Bucket 1.
Bucket 3: Long-Term Needs (Years 16 and Beyond)
- Purpose: Grow wealth to sustain you in the later years of retirement.
- Investment Type: Stocks, real estate, and other growth-oriented investments.
- Goal: Maximize long-term growth potential, accepting higher risk for the possibility of greater returns.
Benefits of the Bucket Strategy
- Risk Management: By diversifying your investments across different buckets, you can better manage risk and reduce the impact of market volatility on your retirement income.
- Income Stability: The first bucket ensures that you have a stable income for your immediate needs, regardless of market conditions.
- Flexibility: The strategy allows you to adjust your investments over time, shifting funds from one bucket to another as your financial needs and market conditions change.
- Peace of Mind: Knowing that your short-term needs are covered allows you to invest more confidently for long-term growth. The money you won’t need until later can be invested more aggressively than the money you need now.
Contact Us
If you need guidance or advice in helping you secure your financial future, then we would love to speak with you.
301.990.9170
One Bank Street, Ste 100, Gaithersburg, MD 20878
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Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Cambridge, Montgomery Financial Partners, and Nymeo Credit Union are not affiliated. Non-deposit investment products are not NCUA insured, not credit union guaranteed, may lose value. Cambridge Customer Relationship Summary.
Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk.
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