Planning & Investing

Simplifying retirement income: The bucket strategy in three minutes

June 17, 2025

Creating a sustainable retirement income plan isn’t always easy, especially when clients are grappling with how to make a lifetime of accumulated savings last, well, a lifetime. Not only can these plans be complex to create and explain, but investors’ own behavior can derail them through overspending or impulsive reactions to market volatility.

 

That’s where the bucket system comes in. As our Senior Retirement Income Strategist Kate Beattie, CFP, RICP, recently discussed, the bucket system is an adaptable “now versus later” strategy first developed by wealth manager Harold Evensky in the mid-1980s.  

The basics

Retirement savings are put in different “buckets” based on when clients expect to need them: in the immediate-, short-, medium- or long-term. Those buckets are then aligned with different investing strategies, with the most growth-oriented investments being put in the buckets with the longest time horizon.

 

One approach, outlined by Chicago-area financial professionals Joe Schoenhardt and Jim Hinchsliff in an interview on our PracticeLab podcast, is illustrated in this chart. Schoenhardt and Hinchsliff use a time-release model with buckets of spending apportioned depending on the expected time in retirement; for 25 years, they look to fund five broad buckets of investments and then rebalance over time. 

Example bucket drawdown strategy

Timeline graphic shows five buckets spanning 25 years of retirement. Bucket one represents 0 to 3 years and holds cash. Bucket two represents 3 to 7 years and holds conservative and income-producing investments. Bucket three represents 7 to 13 years and holds growth and income investments. Bucket four represents 13 to 19 years and holds growth investments. Bucket five represents 19 to 25 years and holds global growth and small-cap investments. This chart is for illustrative purposes only. Actual time periods and allocations will be based on time in retirement and the investors’ objectives.

Source: Capital Group, Infinity Financial Advisors

This strategy can give investors a “better framework to manage retirement planning without fear,” Beattie says. “Using a bucket retirement strategy can have the positive effect of helping retirees adopt a mental accounting framework for their assets, making it easier for them to understand, quantify and prioritize their retirement spending and legacy objectives.”

 

So how does it work? Imagine a series of buckets filled with water, each one slightly higher than the last. As the lowest empties, water from higher buckets flows down to refill at a new level of balance.

 

Immediate- and short-term buckets: Cash and conservative investments focused on preservation, allocated to cover living expenses without having to worry about market volatility.  

 

Medium-term buckets: A mix of more moderate growth and income-oriented investments.

 

Longer-term buckets: These apply to longer retirement time horizons so can be more oriented to growth to potentially offer higher returns and weather shorter term market shocks.

 

As time goes on, regular rebalancing will ensure that a portion of each bucket moves down into the one below it.

 

Read more retirement income insights here

 

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