The 3-Bucket Strategy for Retirement: A Simple Framework for Income

When it comes to building a sustainable income plan in retirement, managing risk and access to funds becomes just as important as generating returns. One popular approach that balances these priorities is the 3-Bucket Strategy—a framework that divides your retirement savings into three distinct “buckets,” each with a specific time horizon, risk level, and purpose.

Whether you're five years away from retirement or already enjoying your golden years, the 3-bucket strategy can offer structure and flexibility to support your income needs throughout retirement.

What Is the 3-Bucket Strategy?

The 3-bucket strategy segments your retirement assets into three categories:

Bucket 1: Short-Term (0–2 Years) – Liquidity & Safety

This bucket is designed to cover your immediate income needs, typically the next 12 to 24 months. It holds low-risk, highly liquid investments such as:

• Cash

• Money market funds

• High-yield savings accounts

• Short-term CDs or Treasury bills

  
  

Think of this as your financial “sleep-well-at-night” bucket. Its primary goal is stability, not growth. Drawing income from this bucket can help avoid selling long-term investments during down markets.

Bucket 2: Mid-Term (2–10 Years) – Stability & Moderate Growth

This bucket supports your intermediate income needs and may include:

• Short-to-intermediate bond funds

• Dividend-paying stocks

• Balanced mutual funds or ETFs

  
  

The objective here is to generate moderate returns while managing risk. This bucket is often replenished as Bucket 1 is used—providing a reliable income bridge while allowing your long-term assets to remain invested.

Bucket 3: Long-Term (10+ Years) – Growth

This is your long-term growth bucket. Since it won’t be needed for a decade or more, it can be allocated toward higher-risk, growth-oriented assets such as:

• Stocks or stock ETFs

• Real estate

• Alternatives (private equity, infrastructure, etc.)

  
  

Gains from this bucket may be periodically harvested and reallocated to the more conservative buckets as part of a broader income and rebalancing strategy.

Why the 3-Bucket Strategy Works

• Helps Manage Market Volatility: By isolating short-term income from long-term volatility, you may avoid selling investments at inopportune times.

• Provides a Clear Income Framework: With a strategy for withdrawals and replenishments, this structure can help reduce emotional decision-making.

• Supports Rebalancing and Discipline: Periodic reviews allow you to realign with your goals and adjust allocations over time.

  
  

Is This Strategy Right for You?

The 3-bucket strategy is flexible and can be tailored to different income needs, risk tolerances, and tax considerations. It also allows for strategic withdrawal planning from taxable, tax-deferred, and Roth accounts.

A CERTIFIED FINANCIAL PLANNER® professional can help you design a customized approach that reflects your full financial picture, including other income sources such as Social Security, pensions, or rental property cash flow.

Final Thoughts

Retirement planning involves trade-offs, and the 3-bucket strategy is one way to thoughtfully manage both income and risk. By aligning your investments with your time horizons, you can pursue growth while maintaining access and confidence.

Interested in learning how a bucket strategy might fit into your retirement plan? Let’s schedule a conversation. https://www.rigdencapital.com/

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Rigden Capital Strategies was founded on a simple belief: financial advice should be personal, transparent, and centered around your goals—not built on generic models or product-driven sales. With decades of combined industry experience, we’ve developed a process grounded in three core values: value, integrity, and progress.

As a fee-only fiduciary, we provide personalized, goals-based wealth planning services designed to adapt with your life. Our services include investment management, retirement and tax planning, and estate coordination. We use a mix of active and passive strategies to help clients navigate market changes with clarity and confidence.

We believe in building real relationships and delivering clear, actionable strategies—focused on long-term planning and aligned with your objectives.

Your goals, our strategies. Together, let’s make your goals happen.

Disclosure:

This content is for informational purposes only and does not constitute individualized investment advice. Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Consult a qualified financial professional before making any investment decisions.