Empowering Your Golden Years: The 3-Bucket Strategy Demystified

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Empowering Your Golden Years: The 3-Bucket Strategy Demystified
  • By Gautam Tejwani
  • 07th May, 2024
  • Finance

Retirement Mastery: The 3-Bucket Approach Unveiled
Retirement planning doesn’t have to be complicated. You can arrange your retirement corpus using the 3-bucket strategy to guarantee long-term growth and a consistent cash flow. Let’s explore this straightforward but powerful strategy.

Comprehending the Three-Bucket Approach

Consider having your retirement corpus split into three separate buckets, each with a specific function based on your needs and time

1) Bucket of Liquidity: Urgent Needs

This bucket serves as your safety net for unforeseen, short-term costs for the next two to three years. Liquidity is the key, not big returns. This is what enters:
• Emergency savings
• Costs of healthcare each month

2) Safety Bucket: Stability in the Midterm

The next five years come into focus after your immediate needs are met. In addition to outperforming inflation, this bucket should keep returns and liquidity in check. Think about these possibilities:
• Fixed down payments
• Real Estate Investment Trusts (REITs); bonds; hybrid funds;

3) The Bucket of Wealth Creation: Long-Term Growth
With long-term investments, this bucket seeks to increase your wealth over a period longer than eight years. Even though these assets can be volatile, they have the potential to yield large returns in the long run. Consist of:

• Equity funds
• Gold; real estate

After learning about the buckets, here’s how to use them:
Frequent Resupply: Transfer funds from the bucket of wealth creation to the buckets of safety and liquidity on a regular basis.
Customization: Adjust the plan to meet your objectives, integrating it with other techniques as needed.
Healthcare Provision: Include medical costs in the liquidity bucket, particularly if you have continuing medical needs.

Benefits of the 3-Bucket Strategy

  • Short-Term Stability: Ensure immediate needs are met without worrying about market fluctuations.
  • Medium-Term Security: Strike a balance between liquidity and returns, providing stability for the next few years.
  • Long-Term Growth: Let your wealth grow over time through strategic investments, securing your financial future.


Retiring with Confidence and Enjoying It
The three-bucket method makes retirement planning simple and efficient. You can navigate retirement with confidence and ease by bucketing your corpus according to different time horizons, which will ensure a smooth transition through your golden years.

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