A retirement bucket strategy is an investment approach that segregates sources of income into three buckets. Each bucket has a defined purpose based on when the money is for immediate, intermediate, and long-term. The idea behind this strategy is to have access to cash in the short term, so the person will not have to worry about the fluctuations in the stock market. 

How to Use the Retirement Bucket Strategy

To benefit from the retirement bucket strategy, it is essential to follow specific plans for each bucket. Here is how to manage each bucket and how much money to add to each bucket.

The Immediate Bucket

Cash and other liquid investments belong in the immediate bucket. These investments include short-term CDs, U.S. T-bills, and high-yield savings accounts. Fill this bucket with liquid investments, which are converted into cash. While earning interest on these funds is appealing, the main focus is managing risk and ensuring that the money is there whenever needed.

The Intermediate Bucket

This intermediate bucket covers expenses from Year 3 to Year 10 of retirement. Money in the intermediate bucket should continue growing to keep pace with inflation—however, it is essential to avoid investing in high-risk assets.

The Long-Term Bucket

Long-term investments mimic historical stock market returns. These assets grow a nest egg more than inflation while refilling the last buckets. Long-term buckets are invested in riskier assets that may be volatile but have growth potential over ten years or more.

How to Maintain the Retirement Bucket Strategy

While the retirement bucket strategy informs where one should hold money, it is not a complete strategy. It does not mention what types of investments to hold, the rate to withdraw, or how to rebalance them. This retirement bucket strategy does not advise selling some of the long-term to manage risk and capture some of those gains. For this reason, experts recommend a rebalancing strategy on top of the bucket strategy.


The retirement bucket strategy withstands short-term dips in the market to prevent investors from selling low to cover monthly expenses. The strategy has shortcomings that require the layering of additional strategies to manage risk.

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