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M*: A Conservative Retirement Portfolio In 3 Buckets
If I were 11+ years away from retirement I would hold only bucket three, but add NAESX to the portfolio. Percentages could be adjusted in bucket three to make it more or less aggressive depending on individuals age and risk tolerance.
When 3-11 years away from retirement hold buckets 2 & 3. Again, phase into this bucket 2 over the 8 years by using profits raised from bucket 3 or from new investment contributions.
When you are 1-2 years away from retirement be sure to raise enough cash to create bucket 1 by reallocating from buckets 2 & 3. Continue reallocating into bucket one from buckets 2 & 3 throughout retirement for distribution needs and during periods of bucket out performance.
I actually like the idea of creating a mechanism that funds bucket one throughout the entire investment time frame by taking profits during periods of market out performance. Always nice to have some dry powder for emergencies, buying opportunities, or to reduce portfolio volatility.
I actually like the idea of creating a mechanism that funds bucket one throughout the entire investment time frame by taking profits during periods of market out performance. Always nice to have some dry powder for emergencies, buying opportunities, or to reduce portfolio volatility.
Yes, I agree completely and was fortunate that my retirement happened after a multi-year run-up, with the accumulation of bucket one assets during that period. I'd rather be lucky than good.
The key benefit of this bucketing approach is that it allows a retiree to not obsess about what is happening in the market since you have several years of expenses already in pocket. I personally differ a bit from what M* lays out, in that I have more years of funds in bucket one, but take a bit more aggressive approach in how the overall funds are invested.
Comments
If I were 11+ years away from retirement I would hold only bucket three, but add NAESX to the portfolio. Percentages could be adjusted in bucket three to make it more or less aggressive depending on individuals age and risk tolerance.
When 3-11 years away from retirement hold buckets 2 & 3. Again, phase into this bucket 2 over the 8 years by using profits raised from bucket 3 or from new investment contributions.
When you are 1-2 years away from retirement be sure to raise enough cash to create bucket 1 by reallocating from buckets 2 & 3. Continue reallocating into bucket one from buckets 2 & 3 throughout retirement for distribution needs and during periods of bucket out performance.
I actually like the idea of creating a mechanism that funds bucket one throughout the entire investment time frame by taking profits during periods of market out performance. Always nice to have some dry powder for emergencies, buying opportunities, or to reduce portfolio volatility.
The key benefit of this bucketing approach is that it allows a retiree to not obsess about what is happening in the market since you have several years of expenses already in pocket. I personally differ a bit from what M* lays out, in that I have more years of funds in bucket one, but take a bit more aggressive approach in how the overall funds are invested.
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