The retirement bucket strategy can help you balance your goal for growth without having to sell securities in a down market to meet your living expenses. With this approch you establish different "buckets" with different allocations.
Long-term portfolio
The long-term bucket comprises the majority of retirement assets and is the engine that drives the retirement income strategy. We recommend holding 7 years or more of assets in this portfolio. Income can be swept to the other buckets over time to avoid having to make large investment sales. This portfolio emphasizes growth and inflation protection and is invested in a diversified mix of equity, fixed and other investments.
Medium-term portfolio
Medium-term investments replenish the near-term portfolio and are invested to generate a higher yield than cash while still emphasizing stability. We recommend holding 4-6 years of assets invested in income-producing securities.
Near-term portfolio
The near-term portfolio provides cash flow for spending in retirement and for unexpected events. We recommend holding cash to cover at least 1-3 years of lifestyle expenses to help avoid selling off investments at inopportune times such as an extended market downturn.