Managing retirement income with a bucket strategy

When you retire and begin drawing income from your savings, selecting and managing your investment portfolio is more important than ever.

On the one hand, you need to generate good capital growth to ensure your savings can sustain a long retirement, with experts estimating around 60% of the income you receive will come from the growth in your savings after retirement. Exposure to growth assets is necessary to overcome the effects of inflation over time but comes with the risk of short-term capital losses and volatility along the way.

At the same time, you need to withdraw regular amounts to live on. Ideally, you’ll want to avoid being forced to sell investments after a short-term fall in value to fund those payments.

Managing these competing requirements can be an ongoing balancing act for retirees. One solution is a bucket strategy, so called because it establishes different pools of savings or ‘buckets’ to address various needs.

What is a bucket strategy?