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What is a cash bucket & a growth bucket?

Cash Bucket (Bucket #1): Contains two years of living expenses in a checking or savings account. Fixed Income Bucket (Bucket #2): Contains five years of living expenses in bonds and other fixed income investments. Growth Bucket (Bucket #3): Contains the remainder of a retiree's portfolio in stocks and other high growth, high volatility investments.

What is a retirement bucket?

The first bucket holds your cash, cash equivalents and other liquid assets designed to be used in the first years of retirement. A medium-term bucket is focused mainly on bonds. A third, long-term bucket of stocks is designed to promote growth.

How much should a cash bucket be?

For most investors, the cash bucket should be equal to one or two years' worth of what Smith calls the "income gap," or the difference between what you get from pensions and Social Security, and what you'll need to cover expenses. Short-term interest rates are still lower than an ant's ankles.

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