The Three-Bucket Strategy: An Organized Approach to Making Your Retirement Savings Last

A Well-Stocked Kitchen

Most people don’t want to think about buckets. Or timelines. Or market cycles.

But what they do want is this: to stop worrying about whether their money will last, and to stop second-guessing every market headline.

Especially in retirement, when the pressure is real.

You’ve spent decades building up your savings. Now, the question isn’t just “Do I have enough?” — it’s “How do I use what I’ve built to create income, protect my lifestyle, and fund what matters most for the rest of my life?”

That’s where structure comes in.

The Three-Bucket Strategy isn’t flashy. It doesn’t rely on bold predictions or the latest financial fad. It’s a simple, time-tested way to give your money a purpose based on when you’ll need it.

Think about your kitchen: you wouldn’t try to feed your household for a month with just a refrigerator. You need fresh groceries for this week, frozen meals for next month, and pantry staples that will last through the season.

It’s the same with your money. Different dollars have different jobs.

And just like your next meal depends on what’s available in the fridge, your next retirement paycheck — the income that funds your life — depends on what you’ve set aside, and when you’ve planned to use it.

Once you see that, everything gets a little bit clearer.

Before we explore each bucket in detail, here’s a quick overview:

• Bucket 1: Now (1 to 3 years of stability) – Cash or near-cash reserves for access and peace of mind to meet near-term living expenses.
• Bucket 2: Soon (3 to 7 years of income) – Bonds or income-oriented assets to generate income for the 3 to 7 years.
• Bucket 3: Later (10+ years for growth) – Long-term stocks and other investments to outpace inflation and support your lifestyle over decades.

Bucket 1: Now (1 to 3 years of Stability)

This first bucket is for immediate needs. It holds enough low-risk, highly liquid assets to cover about 1 to 3 years of living expenses. 

This is not where you seek investment returns. It’s about knowing your basic expenses are covered no matter what the market is doing.

Purpose: Stability, access, and peace of mind
Contents may include:

• Treasury bills (T-bills)
• Cash checking accounts
• High-yield cash savings accounts
• Money market funds
• Short-term CDs

Bucket 2: Soon (3 to 7 Years of Income)

This second bucket bridges the gap between short-term needs and long-term growth. These funds are intended to provide income for the medium term.

The emphasis here is on generating steady income with a reasonable level of risk, aiming to exceed inflation by approximately 2%+ over time.

The income from this bucket periodically replenishes the “Now” cash bucket, helping maintain your lifestyle without prematurely dipping into your long-term assets.

Purpose: Steady income with moderate stability
Contents may include:

• Short- to intermediate-term bonds
• Certificates of deposit (CDs) with staggered maturities
• Treasury notes or other government-backed securities
• Corporate bonds
• Preferred stocks
• Other conservative, income-oriented investments

Bucket 3: Later (10+ Years for Growth)

The final bucket is for long-term growth. Since this money isn’t needed for a decade or more, it can be invested with a higher tolerance for volatility.

The focus here is on capital appreciation and maintaining purchasing power. For most retirees, core equity exposure and real assets offer a strong foundation. Historically, diversified stock portfolios have delivered annual returns in the range of 7% to 10% over extended periods. By giving these investments time to grow, you position yourself to sustain your retirement needs over decades.

Purpose: Growth and inflation protection
Contents may include:

• U.S. and international equities for long-term capital appreciation
• Real assets, including REITs, to support growth and inflation protection
• Private equity (for those with access, ample liquidity, and appropriate risk tolerance)
• Managed futures or other diversified alternative strategies (in moderation and where appropriate)

Why Buckets Make Sense (and Actually Work)

Human beings naturally use mental accounting. We tend to separate our money into categories — even if it all technically comes from the same pool. This instinct isn’t a flaw; in fact, it’s a powerful tool when used with intention.

The Three-Bucket Strategy embraces this behavioral tendency and turns it into a strength. By giving each dollar a defined role based on timing, the strategy creates clarity. And clarity leads to better decisions and greater peace of mind.

Ultimately, this framework helps protect you from the emotional stress of market swings, particularly in the early years of retirement when timing matters most. It also gives you a mental congruity for making withdrawal decisions and adjusting your portfolio over time. You know which dollars are for today, which are for the next chapter, and which are for the future you’re still building toward.

The Value of Structure: Meet David and Susan

Consider two hypothetical retirees, Susan and David. Both enter retirement with similar levels of savings, but their approaches couldn’t be more different.

David doesn’t have a clear structure. His assets are spread across a mix of accounts, and he often finds himself reacting to the markets. When stocks rise, he leans into risk. When they fall, he retreats into cash. His investment decisions swing between too aggressive and too conservative. Over time, this reactive behavior causes him to underperform and constantly second-guess his financial choices. The lack of a plan adds unnecessary financial and emotional stress to his retirement.

Susan, on the other hand, takes a structured approach using the Three-Bucket Strategy. She knows exactly what her cash flow looks like for the next couple of years. She understands that her mid-term bucket is there to refill the short-term one as needed, and that her long-term investments have the time and space to grow. When headlines turn negative, Susan doesn’t feel the need to act. Her plan is built to endure ups and downs.

Both Susan and David started with similar resources, but only one has a system that filters out the emotional noise and allows the investments to serve their purpose — supporting both the short-term lifestyle and long-term plan. That structure doesn’t just improve outcomes. It improves the experience.

Supporting the Life You Want to Live

The Three-Bucket Strategy doesn’t predict the future. It prepares for it. And when implemented thoughtfully, it can help turn your retirement savings into a reliable, resilient plan that supports the life you want to live.

Much like a well-stocked kitchen — with fresh items in the fridge, frozen meals for the weeks ahead, and pantry staples ready for the long term — this approach ensures that your financial needs are covered today, tomorrow, and years from now.

If you’re wondering how to apply this framework to your own retirement picture, we’re here to help you take the next step—with clarity and confidence.