The Two Bucket Retirement Plan

Keep It Simple, Stupid – KISS. That is the best advice I can give for one’s retirement. The more complex your retirement plan the harder it will be to keep to it. Thus, the beauty of the 2-Bucket Retirement Plan.

It works just like this.

You need $50k a year in income. You get $30k from Social Security. You need to make up the extra $20k from portfolio distributions.

In bucket 1, you then keep 3 years worth of that $20k into a safe account, checking and laddered CDs.

In bucket 2, you invest in a diversified equity portfolio. Every year, when the market gives you gains, you take those gains and put them into the first bucket. If the market is down and your portfolio has lost ground, you leave it be.

Literally that simple.

Notice though in bucket 2 there are NO bonds. The reason is that your income, Social Security, pensions etc. should be viewed as your bond portfolio. So, given you have the bulk of your income coming from bonds there is no reason to add MORE bonds. You already have that covered.

You do need to check each year in this plan. It is NOT a set it and forget it plan. But, of course, NO retirement plan should be a set it and forget it. That’d be crazy.

If you start the year with $100k in bucket 2 and by year end it’s worth $120k. Take that $20k out and move it to the first bucket. Simple as can be.

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