Master the Bucket Strategy

A SECURE SAVINGS STRATEGY

Master the Bucket Strategy: Get Smart About How You Save

Learn the Bucket Strategy for effective savings management with our exclusive video. Discover how to allocate your assets in three strategic buckets for stability, growth, and security. Watch now to optimize your retirement planning!

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Smart Asset Allocation Using The Bucket Strategy

What is the Bucket Strategy?

The Bucket Strategy is a popular and easy way to visualize how to allocate your savings.

Simply put, there are three (3) buckets:

Green Bucket: Immediate, liquid assets for emergencies.

This bucket represents your liquid assets – things like a checking account, savings account, or money market funds – typically earning 1% if you’re lucky. The point of this bucket is not growth – the main feature is liquidity. Think of it as a rainy-day fund that typically would hold 3-6 months worth of income that can be easily accessed in case of an emergency.

Blue Bucket: Safe investments for steady income.

The Blue Bucket is your “safe and secure” bucket with the main goal being protection with modest growth. Typically, in this bucket you will have things like bonds, cash-value life insurance, or indexed annuities. These are funds that grow at a steady rate, but more importantly are at a near zero risk of loss. Ideally, these items should be earning somewhere between 4% to 8% – nothing super exciting… just slow, steady and safe growth.

Red Bucket: Investments with higher risk and potential returns.

The Red Bucket represents your money in the market – stocks, mutual funds, 401K, IRA, etc. The Red Bucket has unlimited potential for gains – but can also experience a loss due to a downturn in the market. The amount of money in this bucket is typically tied to your age, risk tolerance, and retirement goals.

How do I implement the Bucket Strategy into my financial plan?

Utilize the Rule of 100:

As we said before, the Green Bucket represents your liquid assets. Typically, this bucket will have 3-6 months of income that can be easily accessed. But how do you allocate the rest of your savings between the Blue and Red Buckets? That’s where the Rule of 100 come in.

The Rule of 100 states that whatever your current age is should be the percentage of your money that you should have in the Blue Bucket.

For example, if you are 35 years old, then 35% of your savings should be in the Blue Bucket. The remaining savings – in this case, 65% should be in the Red Bucket. The idea is that when you are young, you are trying to catch the upside of the market when you can afford to be a little more aggressive, and can weather a loss due to downturns due to the fact that you have TIME to recoup those losses.

Of course, when the bulk of your savings is in the Red Bucket, you are in a risky situation. All it takes is one bad year to wipe out a big portion of what you’ve saved for retirement. The Rule of 100 teaches us that as we get older, we allocate more in the Blue Bucket so a majority of our savings are safe and secure with modest, steady gains.

The Bucket Strategy is a straightforward, yet powerful approach to managing your retirement savings. By dividing your assets into the Green, Blue and Red Buckets you’re not just preparing for the unexpected, you are also building a foundation for a retirement that is as secure as it is fulfilling.

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