Your Money ;
market is down for the year, take the entire
4 percent from the bond portion, to give your
stocks time to recover. For simplicity, use mu-
tual funds, not individual stocks. My personal
planner takes this approach.
The bucket strategy. Here, you target
your investments to pay o; over di;erent
For example, you might set up five buck-
ets. Bucket 1, to be used up during your first
five years of retirement, would contain cash,
certificates of deposit or an annuity paying
a monthly income for five years. Bucket 2,
for years six to 10, might contain a short-
term bond fund and some Treasuries.
Buckets 3 and 4, for years 11 to 15 and 16 to
20, could own intermediate bonds and bond
funds or balanced stock-and-bond mutual
funds. Bucket 5, for money you don’t expect
to need for more than 20 years, can be invest-
ed more aggressively in stocks. Every three
years or so, replenish the near-term buckets
with money from the next bucket up.
Michael Kitces, research director for the
Pinnacle Advisory Group, says that bucket-
eers often wind up with the same balanced
stock-and-bond allocation as the total re-
turn investors do.
The income floor strategy. Provide for
your basic income needs by buying an an-
nuity with lifetime payments that start at
the date you expect to retire.
Or, at retirement, put part of your money
into an immediate payout annuity, which
will send you a monthly check. Invest the
rest in stocks and bonds, withdrawing the
money according to the 4 percent rule.
A 2010 study by Gallant Distribution Con-
sulting Research in Sherborn, Mass., found
that more than half of financial planners
now prefer the bucket or income approach.
“People feel comfortable with it,” says plan-
ner John Sestina.
What if you realize that your money won’t
last? There are other options—working lon-
ger or returning to work, cashing in your
house, adding an apartment over your kid’s
garage. As I said, you have to be a fox. ;
Jane Bryant Quinn is a personal finance
expert and author of Making the Most of
Your Money NOW. Her column, Financially
Speaking, will appear monthly in the Bulletin
and online at aarp.org.