Understanding the 3 Bucket Strategy for Retirement

When it comes to retirement planning, complexity is the enemy. The more complicated your plan, the harder it is to stick to it — and the more likely it is to fall apart under pressure.

That’s why we love the simplicity of the 3 Bucket Strategy.

It’s easy to understand. It gives you clarity. And best of all? It’s designed to keep your retirement income steady, flexible, and secure — no matter what life throws your way.

What Is the 3 Bucket Strategy?

The 3 Bucket Strategy is a way to divide your retirement money into three distinct purposes, each with a clear role in your financial plan:

1) Bucket 1: Cash Flow (Guaranteed Income): This is your “must-have” bucket. It covers essential living expenses — housing, food, utilities, healthcare. Your goal here is guaranteed income. That means:

• Social Security

• Pensions (if you’re lucky)

• Fixed Indexed Annuities (with income riders)

  Why it matters: You don’t want to rely on the stock market to pay your bills.

2) Bucket 2: Growth & Flexibility: This is your “nice-to-have” bucket — money for lifestyle upgrades, travel, hobbies, and long-term needs like inflation protection. Tools in this bucket might include:

• Roth IRAs

• Brokerage accounts

• Dividend-paying funds or ETFs

  Why it matters: This bucket helps your money grow over time and gives you financial freedom.

Bucket 3: Emergency & Opportunity: This bucket is your cushion. It holds accessible money for emergencies or unexpected opportunities — like helping family, covering medical costs, or snagging a great deal on a new vehicle. Typical tools include:

• Cash savings

• Money market accounts

• CDs or MYGAs (Multi-Year Guaranteed Annuities)

Why it matters: Life is unpredictable. This bucket helps you stay prepared without disrupting your long-term plan.

How the Buckets Work Together

Think of your buckets like a team:

• Bucket 1 gives you stability

• Bucket 2 gives you growth

• Bucket 3 gives you confidence

By dividing your assets by purpose — not just investment type — you get a smarter, more sustainable plan.

This structure also helps reduce anxiety. When the market dips, you’ll know your income is protected. When prices rise, you’ve got a plan for that, too.

Common Questions About the Bucket Strategy

“Do I need to rebalance the buckets?”

Yes, occasionally. Life changes — and your buckets should adapt. That’s why we recommend annual reviews.

“What if I already have a financial advisor?”

That’s great. This strategy works with your advisor’s plan — not against it. We simply help cover the gaps most advisors don’t address, like guaranteed income.

“Is this strategy just for wealthy people?”

Not at all. In fact, it’s even more important for everyday retirees who don’t have millions saved. Why? Because they can’t afford big mistakes.

▶️ Watch our video: “Your Guide to Guaranteed Income During Retirement.”

Final Thoughts

The 3 Bucket Strategy brings simplicity, balance, and peace of mind to your retirement. Whether you’re just starting your plan or already retired, it’s never too late to organize your money by purpose.

Want to see how your current plan stacks up?

📘 Download our Retirement Planning 101 guide to learn more.

📅 Book a free retirement income review — no cost, no pressure.