The 3 Buckets Strategy of Retirement Planning Explained

The 3 Buckets Strategy of Retirement Planning Explained

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[williambrown]

I wanted to point out when some people talk about the 3 buckets strategy they talk about a short-term bucket (2-4 years expenses) (cash, money markets, CDs), mid-term investment (2-4 years expenses) (bonds, dividend funds), and a long-term bucket (rest of funds) (growth stocks). So, there can be some confusion between tax 3 buckets and investment strategy 3 buckets.

[zoraster]

The after tax bucket is also important for big expenses before retirement. You don’t want to be a paper millionaire and then when you go to buy a car or do something major you have no liquidity. You need that war chest.

Edit: Also, if you want to retire before 59.5 that after tax bucket can become your “bridge the gap” fund.

[IwasRetired]

I'm seven years into retirement and I use three time buckets and three tax buckets and consider the asset allocation and asset location over all those buckets. "Window dressing" is sometimes alledged for the three time buckets, but I have found time segmentation to be very useful. The three tax buckets, as you point out here, are also very important.

[stevemlejnek]

I believe the "window dressing" comment is in regard to having a cash bucket, bond bucket and stock bucket.

[hanswhite]

The three bucket strategy is great if you are a high income earner. If you are a lower income earner (therefore lower tax bracket) a two bucket strategy is better. The two buckets being roth (tax free) and taxable (after-tax).

[dannyscott]

There was a time when we " made it here", we had jobs for everyone and the products were of high quality, then the 1% wanted everything. Now Inflation drives prices up and if Inflation is high and jobs disappear by the millions we are in a recession and maybe headed for a Depression…

[bwhite]

Wish I would have known ROTH when I was younger. I'm retiring from my job in 2 years and my current tax bracket would hammer me on ROTH. I tell my kids do ROTH now while your income is at its lowest. I'm planning on using a couple years of my 4 years after tax $ to live on after I retire and do ROTH conversions then. Bummer! I may just have to bite the bullet and do some of those ROTH conversions after retirement because I don't want to eat up too much of my after tax stuff. Good news is with all the savings we do i need a lot less to live on after retirement.

[anaestereo]

..I'd add reverse and drive a couple more times. Txs for the gr8 content.

[bassplayero]

This is unrelated to the video and I know it’s been discussed previously, but hoping this catches someone’s attention from the money guy show:

What is your ideal list of personal finance books?

[Lasutiu]

Is there a target % you should have in each bucket?

[txlatinchic]

They could be asking about the other 3 buckets: 1-3 years cash, 4-10 years conservative investments, and higher risk bucket.

[henrythomas]

Great video! Some key points were highlighted that I hadn't heard anyone else discuss. Thank you!

[randy]

If you are retired, about 50/50 allocation is a good start (Moderate allocation) and that includes T-Bills, Intermediate Bonds, and your money market fund. And a mix of AVGE, FDIF, and MAGS for your equity exposure and Worldwide coverage. You can pick between MAGS and FDIF if you want to avoid duplicate company coverage; however, both of these ETFs cover AI, go with FDIF which is a fund of funds ETF of "DISRUPTOR" companies in five sector ETFs in the stock market. You can also add the GLTR to add precious metals to your portfolio. I have four buckets with the fourth being a taxable account for my RMD withdrawals.

[solominded]

Fidelity has always been an underdog to me in terms of rates and low cost index funds.

[MichaelAnderson-wkno]

What's the point of having the tax-deferred bucket? Why not just have everything in tax-free and after-tax?

[mikepotsic]

Agree with vanguard comment and good information on bucket strategy.

[jackstar]

I've been listening to these guys on and off for two year. The Money Guys like to beat around the bush and never really answer questions because they save their info for only clients.

[davidmclifton]

The guy asking the question was confusing the tax buckets with the bucket withdrawal strategy (where you move x years of money into cash, y years into bonds, etc) - which is just window dressing.

[gojl]

Someone in the early stages might still have the three buckets.
1. Emergency Fund
2. Roth/HSA
3. 401k with the employer match

It's just that it doesn't seem yet like those matter until the numbers get bigger.

[branchb]

So as a 19 yr old should I not only have a roth ira ?