Buckets & Buffers

[Mysto]

As I continue my quest to build the "perfect" retirement portfolio - I am moving toward the theory of a buffer or bucket approach.

I've just finished reading Asset Dedication by Huxley and Burns. They make a case for having 5 - 10 years of required income in a fixed income ladder. (In other words a self annunity) The rest of the funds are 100% in equity index. The idea is that you have eliminated much of the volatility risk with the income ladder so the rest should be invested for maximum growth. This basic idea is very appealing to me and is the way that I am currently leaning.

I have also seen other methods suggested that use a three bucket approach with a short - medium - and long term portfolios.

I would like to hear from people in the group that use this buffer or bucket approach and how you go about it. (Grumpy - I know you do and I'd like to more about your structure and rules). I'd also like to hear from those that don't agree with this approach and why.

I strive to learn.