You’ve diligently saved for retirement, building a nest egg you want to protect. But market volatility, shifting tax laws, and increasing lifespans pose significant challenges. The solution? A well-structured retirement income plan, and the 3-Bucket Strategy is a powerful tool to achieve just that.

This strategy isn’t just about saving; it’s about managing your retirement funds to ensure a consistent income stream, regardless of market fluctuations. It prioritizes diversification and carefully allocates your assets to minimize risk and maximize your financial security.

Understanding the 3-Bucket System

The 3-Bucket Strategy divides your retirement investments into three distinct categories:

• Short-Term Bucket: This bucket holds your immediate needs, typically covering 1-2 years of living expenses. It’s invested in highly liquid, low-risk assets like cash, money market accounts, or high-yield savings accounts. This provides readily available funds for daily expenses, reducing reliance on potentially volatile investments during market downturns.
• Intermediate-Term Bucket: This bucket covers your expenses for the next 3-5 years. It allows for slightly more aggressive investing strategies, potentially incorporating bonds or balanced mutual funds, offering a blend of growth and stability.
• Long-Term Bucket: This bucket houses the bulk of your retirement savings, designed for growth over the long term. It can include stocks, index funds, or other higher-growth investments that align with your risk tolerance and time horizon. This bucket is meant to grow your wealth for the years beyond your immediate needs.

By dividing your investments this way, you protect yourself from market volatility. When markets dip, you can draw from your short-term bucket without touching your long-term investments, preserving their potential for future growth. This systematic approach allows for smoother withdrawals and peace of mind during periods of market uncertainty.