BUCKET STRATEGY: A ROAD MAP TO FUND YOUR SUNSET YEARS

Circumstances change, so your strategy should adapt to align with risks and financial goals

- Abhishek Kumar

Retirees or those close to retirement face the challenge of managing their savings for their lifetime, no longer having the luxury of building up their savings, and instead, need to withdraw from their corpus. They cannot afford substantial erosion of their corpus as it must cover their expenses. On the other hand, keeping a large portion of their savings in cash or cash equivalents may limit its longevity.

Here's a well-thought-out bucket strategy—segmenting retirement savings into multiple buckets designed for specific time periods and risk levels—can provide growth potential and stability during retirement.

Basics of bucket strategy: Retirees' assets are divided into three buckets: short-term, medium-term, and long-term. Each bucket has its own purpose, time horizon, and risk level.

Bucket 1: Short-term needs (0-2 years)

This is the most conservative bucket, covering immediate and unforeseen expenses in the first two to three years of retirement. Assets in this bucket are kept in cash or cash equivalents, such as savings accounts, money market funds, or short-term bonds. These low-risk investments provide high liquidity, ensuring that retirees have quick access to funds when needed.

Bucket 2: Medium-term (3-10 years)