Using bucket strategies for Retirement Income planning has become more popular in recent years and the reason is pretty simple: Dividing a portfolio into separate pools or buckets each with varying investment objectives, works.
The basic concept is to separate the investment money from the dollars that need to stay liquid. With the global financial crisis driving home the value of a predictable income stream, techniques to provide investors with a pot of "Safe Money" that generates secure income as well as a pot or pots of money set aside for growth should be a part of every retirement plan.
There is a debate among academics and throughout the financial planning community over the optimal number of buckets to be used in the strategy. But regardless of whether the portfolio is simply split in two or divided in half a dozen or more separate pools, the one constant is the presence of a bucket dedicated to between two and five years of safe liquid income.
As with all bucket strategies, the idea is to keep the longer-term pool in a position to be able to fund the near-term cash bucket which provides the retiree with a steady pay check.
We know that as a retiree, they can't afford to sell investments in a down market, but if you have three years worth of income put aside in January 2008 you would have been ok.
To find out more about this strategy call our office at (732) 364-5462 and ask for Kathy or Tom.
Tom
No comments:
Post a Comment