mathjak107
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 27, 2005
- Messages
- 6,205
True. In reality, the Lucia "buckets" approach is just another way to look at asset allocation -- only instead of representing your allocations in terms of percentages, you look at the allocation of the "safer" stuff in terms of number of years of income.
The place where I get a little tripped up is that it's not entirely a mechanical strategy in that unlike rebalancing in a traditional AA, there's no specific, well-defined trigger mechanism for moving money from riskier buckets to safer buckets. For sure, you wouldn't have moved some out of the stock bucket in 2008, since much of the "buckets" idea is to have enough secure income to avoid the need to sell stocks low -- but if stocks are flat, up 5%, up 10%, up 20%, do you rebalance by replenishing the safer bucket, and if so, how much? As Rich mentioned, this is a fairly vague concept and a lot of us prefer more rigid, mechanical approaches such as "on this day every year, I will rebalance back to 60/40" or some such. But I do think the underlying idea is sound -- keep enough in the safer investments to make it very likely that your stock bucket can recover from a bear market before needing to "raid" it.
our plan is replenish whenever markets are higher to capacity....overall gains are less then waiting until out of money in buckets 1 and 2 but much safer and comforting