Weekend Reading: Why Critics of Bucketing Strategies are Wrong

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

Bucket strategies are immensely popular in the realm of retirement planning strategies, but as with any financial approach, they have their naysayers too.


Advisors against: A common criticism of utilizing the bucket strategy when it comes to retirement income stems from the conservativity placed around bucket one. With this approach, investment risk is nearly eliminated throughout the early years of retirement, which causes some advisors to believe the focus on low-yield investments prevents potential growth for income.

Those in favor: Here, the author sides with the latter of this debate, making the point that there is a “big picture” impact advisors can miss when it comes to the income bucket strategy, which includes:

📌 Advisors overestimating the impact on initial monthly income due to invested assets at low interest rates

📌 Advisors failing to identify the distinct differences between the planning needs of “overfunded” and “constrained” investors

For constrained investors in particular, maintaining a five-year, risk-averse bucket one is, as the author states, “the most valuable feature of the bucketing strategy”. It not only helps safeguard savings from interest rate impact, but can also be viewed as your own “psychologist on call” due to its long-term staying power and ability to improve investor behavior. When partnered with a professional financial advisor who can help implement this strategy, fear-induced selling becomes less likely and securing a predictable income becomes more feasible.

Peace of mind is priceless: Retirement income planning is as much psychological as it is strategic. You need to implement strategies and frameworks that will allow you to maintain a sound mind in order for long-term success to be achieved.