Covisum Blog

The bucket strategy is designed to break a retiree’s assets into "buckets" based upon when those buckets are expected to be used to provide retirement income. The buckets nearest today are invested conservatively so that market fluctuations will have little impact on the retiree’s ability to draw a predictable amount from them. The investments in later buckets are invested more aggressively, with the expectation that a higher risk level should provide a higher return over time. In some bucket models, buckets are "refilled" by selling from later buckets during good times in the markets. In other bucket models, the client's asset allocation is allowed to become steadily more aggressive as the client ages. The first option works better for a constrained investor who has just enough retirement savings to meet their needs. The latter works better for someone who is well-funded, with more than enough assets to weather significant dips in the markets.