The Bucket approach to retirement-portfolio management, pioneered by financial-planning guru Harold Evensky, aims to meet those challenges, effectively helping retirees create a paycheck from their investment assets.

Divide your retirement portfolio into three buckets. The first bucket is used to fund day-to-day living expenses. The third bucket is used to fund longevity. The middle bucket is the go-between or transfer place to refill bucket number #1 as it is depleted.

Here’s how.

• Save 15% a Year. The old rule of thumb used to be that you could fund a stable retirement by saving 10% of household income annually.
• Save More Than 15%!
• Sweat the Big Stuff.
• Maximize Your Retirement Accounts.
• Make Your Money Work for You.
• Get Ready to Retire.
• Make Your Money Last.
• Get Help If You Need It.

The 25X rule says that if you save 25 times your desired annual retirement salary, you can withdraw 4% of that amount each year and it will last 30 years.

Financial Independence, Retire Early, or “FIRE” is a way to plan out your finances and reign in your spending habits so that you can stop working as early as your 40s. People that use this method try to save a large portion of their income — upwards of 75% — so they can retire before their 40th birthday.

The Three Tax Buckets for Investors

• Taxable accounts (e.g., bank account, brokerage account, family trust account)
• Tax-deferred accounts (e.g., 401(k), 403(b), traditional IRA)
• Tax-free accounts (e.g., Roth IRA, Roth 401k)

The Three Bucket System. The 3 Bucket System. This is a procedure for washing, rinsing, and sanitizing where a different bucket and sponge or mop is used for each task.

2. The three Barefoot Investor buckets

• BLOW – The everyday bucket. 100% of your income enters here.
• MOJO – The emergency savings bucket. This bucket is your safety money or emergency fund.
• GROW – The investments bucket.
• BLOW – The everyday bucket.
• Mojo – The Emergency savings bucket.
• Grow – The investments bucket.

F.I.R.E. stands for “Financial Independence, Retire Early.” The goal is to save and invest aggressively—somewhere between 50–75% of your income—so you can retire sometime in your 30s or 40s. That’s right: You need to save at least half of your income.

The three-bucket method is simply an extension on the 2 bucket method. The action for which the third bucket is used also determines to order of the steps within the washing stage.

Overall, the bucket strategy is a proven concept that helps investors visualize the changes they may need to make as they approach retirement and begin turning retirement savings into disposable income.

The Bucket Strategy (not to be confused with the “Bucket List”) is another way to describe a cash distribution method to provide you with income from your nest egg during any kind of market cycle.

The bucket strategy sets aside assets for the short term and invests assets that are not immediately needed in long-term accounts with higher risk investments, potentially yielding a better rate of return. The bucket strategy helps to mitigate any extreme lows or highs of the market during retirement.