Many retirees feel uneasy about their financial future. Whether it’s market volatility, confusing advice from advisors, or just a lack of clarity, that stress can build over time.
You might turn on the news and see negative headlines, or watch your portfolio fluctuate and wonder if you’re still on track. It’s especially difficult if your advisor isn’t communicating clearly or if everything feels like a black box.
The good news is that there’s a simple way to take back some control.
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The Problem
Retirees often have a portfolio filled with different investments chosen by an advisor, but very little understanding of what those investments are or how they work.
That confusion leads to anxiety. People don’t know which accounts to pull money from, what to do if markets go down, or how much they can safely withdraw. When decisions feel complicated, stress takes over.
Even simple questions like “Can I afford to buy a car this year?” become difficult to answer.
The Solution: The Three Bucket Strategy
This strategy creates structure in your retirement plan by dividing your portfolio into three time-based buckets.
Bucket 1: Short Term
This bucket includes one to two years’ worth of income. If you’re withdrawing $50,000 per year, you would keep $100,000 here. This money should be invested very conservatively because you’ll need it soon.
Bucket 2: Mid Term
This is for years three to ten of retirement. In the same example, $400,000 would go here. It’s still invested conservatively but has more time to recover if markets dip.
Bucket 3: Long Term
Any money not needed for ten years or more goes into this growth bucket. This is the part that will fluctuate with the stock market. You only move money from this bucket when markets are doing well.
How It Works in Practice
Each year, you withdraw money from the short-term bucket. Then you refill it by transferring from the midterm bucket. If the long-term bucket had a good year, you also refill the midterm bucket from there. If the market is down, you leave the long-term bucket alone.
This gives you a ten-year buffer before you ever need to touch the volatile part of your portfolio.
For example, during the 2008 crisis, markets took six years to recover. With this strategy, retirees don’t have to sell during a downturn because they’ve already secured years of income.
Case Study: Rick’s Retirement Plan
Rick is drawing $45,000 per year from his RRIF and $5,000 from his TFSA. These amounts are planned out year by year, and the first two years of withdrawals are held in the short-term bucket.
The next eight years of planned withdrawals are held in the midterm bucket. Any remaining assets are in the long-term bucket for growth.
Rick also plans to buy a car in 2026, so that amount is included in his midterm bucket today. Over time, it will shift into the short-term bucket, ready for withdrawal when he needs it.
This structure makes it easy to see where his money is coming from and which part of the portfolio is affected by market swings.
Final Thoughts
When retirees understand which parts of their portfolio are stable and which are exposed to risk, they feel more in control. Market dips feel less threatening because they know their income isn’t coming from that volatile bucket anytime soon.
If you’re feeling uneasy about your retirement plan, the three bucket strategy can help you gain clarity and reduce stress.
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