Another look at buckets

[pb4uski]

Good video with some practical tips on income mechanics. I like C. Benz because she's accessible, factual, practical, and, most importantly, not trying to sell something.

Not real hard on the eyes either.

 

[grasshopper]

Not real hard on the eyes either.

Agreed.

My plan so far (9 years) is close and has worked so far. I only digress from CB's bucket plan, by including known income as part of my cash. So I only have 6-12 months living expenses in cash, because I draw SS, have quarterly payouts, and LTCG that I siphon a little cash from. Half my portfolio is in a taxable account, so there is a good stream of funds coming in.

 

[Huston55]

Agreed.

My plan so far (9 years) is close and has worked so far. I only digress from CB's bucket plan, by including known income as part of my cash. So I only have 6-12 months living expenses in cash, because I draw SS, have quarterly payouts, and LTCG that I siphon a little cash from. Half my portfolio is in a taxable account, so there is a good stream of funds coming in.

6-12 mos if you had to find ALL expenses with cash but, >6-12 mos since part is funded by other streams? If this is the case, then it seems you should count it as >6-12 mos, at least mentally.

 

[Corporateburnout]

Good presentation and thanks for sharing.

As bucket 1 starts running low, I assume it is refilled from Bucket 2. Eventually both 1 & 2 will run low, and 3 will end up with an almost all-equity portfolio. To prevent this from happening one would need to perform periodic rebalancing on all three buckets. If so how is this different from a 60/40 balanced portfolio? What is the advantage of the buckets system other than an asset allocator?

 

[pb4uski]

There is some sort of rebalancing but the mechanics were not crystal clear to me. It sounded to me like the difference is that when equities lag there isn't rebalancing and you stay the course and continue to draw from bucket 1 (and the top of bucket 2 if needed) but when equities are doing well you sell some and replenish bucket 1 and once that is full bucket 2.

I find AA rebalancing easier to understand and it sounds like the end result would be similar other than in some unique situations.

I also use dividends and capital gain distributions from taxable accounts to reduce my draws like grasshopper so I guess on a net basis I probably have 2.5 years of withdrawals in bucket 1 (cash). I'm reconsidering - that might be too conservative.

 

[Fishingmn]

Good discussion. Question for you guru's -

Looking to fully retire in 3 years (52 now) - I have about 40% of my portfolio in rental properties that I own free & clear. These are expected to throw off enough income to cover about 60% of our retirement income needs. These should be somewhat protected by inflation too as rents rise with inflation typically.

For the other 60% of our holdings I'm pretty heavy with stocks as I consider the real estate to somewhat replace bonds. Any guidance on how you'd take into account the real estate holdings if using buckets?

 

[pb4uski]

Her presentation indicates that real estate is in bucket 3 along with high-yield bonds and stocks (18-19 minute mark). YMMV.

 

[mathjak107]

i treat different sources of real estate income differently.

the income we got from our commercial lease rights i treated as bucket one like i would income from a job. ..

rent from resi tenants i keep more as bucket 2.

reits =bucket 3

if i figured appreciation in any way it was a bucket 3