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The Bucket System

The Bucket System concept has been around for a while in one guise or another, but it has been popularized by a San Diego Financial Planner named Raymond Lucia in his book 'Buckets of Money - how to retire in comfort and safety'. The same basic idea in more technical papers uses the term 'bridge' instead of 'bucket'. The concept is quite different from the traditional way of thinking about investing during retirement.

Traditionally, investors in retirement are facing shorter time horizons and thus have less time to recover from a down market. This is handled by increasing the investments in 'safe' investments, perhaps using the rule of thumb of 'investing your age in bonds'; for example if you are 65, you would invest 65% of your assets conservatively.  With improved health and increasing lifespans, the rule has been stretched to 'investing your age less 10 in bonds', so a 65 year old would invest 55% conservatively. This is an admission of the problem with this approach....

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