Bucket Strategy
RetirementGlossary term
Definition
A retirement income strategy that divides savings into separate buckets based on time horizon: short-term (cash for 1-2 years), medium-term (bonds for 3-10 years), and long-term (stocks for 10+ years). Helps manage sequence of returns risk.
Related terms
- Safe Withdrawal RateThe percentage of a retirement portfolio that can be withdrawn annually with minimal risk of running out of money. The commonly cited 4% rule suggests withdrawing 4% in the first year and adjusting for inflation each year after.
- Sequence of Returns RiskThe danger that poor investment returns early in retirement can permanently deplete a portfolio, even if average returns over time are adequate. Withdrawing from a declining portfolio locks in losses and leaves less money to benefit from future recoveries.
- Asset AllocationAn investment strategy that balances risk and reward by dividing investments among different asset categories, such as stocks, bonds, and cash, based on goals and risk tolerance.
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