If you read much about investing strategies for producing retirement income, you’ve probably learned something about “bucket strategies.” These are sometimes referred to as “time segmentation” approaches. The general theory is that different groups or “buckets” of investments are set aside to accomplish specific retirement income purposes for different time periods.
Robert Powell is a writer at MarketWatch. He writes great stuff and is very knowledgeable. Recently he taught a retirement planning course at Boston University. Many of his students were experienced financial planners and were users of bucket strategies in their own practices. Powell wrote an article about a group discussion in which his students provided their own thoughts on the uses of these strategies. It is definitely worth reading.
To pique your interest, one student had this to say:
I have reviewed many multiple bucket strategies (time-segmented and goal-segmented) and I believe that the ongoing friction of taxes and transaction costs overwhelm the viability of the strategies.
These concerns make a lot of sense to me.
As part of his concluding remarks, Powell said this:
If you plan on hiring an adviser to build your retirement-income portfolio, you’ll likely get some version of the bucket or time-segmentation approach instead of a new-world retirement-income plan, inclusive of, say, income annuities, deferred annuities, longevity insurance, absolute returns funds, and the like.
I’m sort of with Powell on this with my retirement income planning. It’s a new world and legacy strategies probably won’t work for most of us.
Here is the link to the full article: Bucket strategies for retirement will stick around