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Old 05-16-2008, 09:29 PM   #41
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Have you noticed how many people in their 50's and 60's are kicking the bucket? Just crossed the 60's line.
What's grabbing my 47-year-old attention is the guys (and they seem to be all males) who haven't even made it that far... "died in his sleep", "died during routine surgery", "massive heart attack while mowing the lawn"-- let alone cancer or car accidents.

So I push a little harder at taekwondo when I read those obits. "Ouch, Nords, that's my head! What's with you tonight?"
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Old 05-16-2008, 10:03 PM   #42
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I've handled the problem by using the "bucket" (I know-I know) theory. At then end of the day it's all just AA but by having a spending bucket of 10 years I just watch my long term bucket grow w/o a drawdown. It's all just psychology but it works for me.
You are not alone on this board. I'm bucketized as well. So I don't lose sleep over the gyrations of the market.
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Old 05-17-2008, 07:39 AM   #43
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I am not there yet on the withdrawl issue but I plan on using a 2-3 yr living expense bucket to help smooth out market gyrations and try to keep my SWR in the 2.25 to 2.75 range. I would like to make it longer but think 2 yrs is ok. The issue with this may be the inefficiency of return as to what I "could" be making. But I guess it is worth it for me to sleep well at night. At least for now til I put it into practice.

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Old 05-17-2008, 11:48 AM   #44
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I have a "bucket" of extra cash in a CD. This was to be a fall back. The MM was there for day to day flow. Then the tax payments were so BIG that I just about depleted the MM. I told DH no big purchases until the CD comes due in July (Ok you can order that one $700 lens... this is like women with shoes.....) I will breath a little easier after July 5th. The CD is @ 5.75% I can kiss that rate goodbye!
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Old 05-17-2008, 12:00 PM   #45
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I have a "bucket" of extra cash in a CD. This was to be a fall back. The MM was there for day to day flow. Then the tax payments were so BIG that I just about depleted the MM. I told DH no big purchases until the CD comes due in July (Ok you can order that one $700 lens... this is like women with shoes.....) I will breath a little easier after July 5th. The CD is @ 5.75% I can kiss that rate goodbye!
Keep an eye on Credit Unions - Navy Federal just posted a 5% APY CD - long term and $20K Minimum, but the rates seem to be coming up SLOWLY.
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Old 05-17-2008, 12:34 PM   #46
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Have you noticed how many people in their 50's and 60's are kicking the bucket? Just crossed the 60's line.
At 55 yo, I didn't have a single contemporary close friend, relative or work associate who had died. At 60, I have nine! That crosses my mind everyday.

Also, at 60 I find myself much less open to cutting spending due to down markets. Putting off vacations, a new kayak or spinning reel doesn't seem as optional as it might have a few years ago.

My RE portfolio is a diversified 60/35/5 (or so) allocation and I'd describe it as typical, dominated by low cost index funds. Despite not using any of the common gimicks such as "buckets" or heavy doses of cash, I haven't had any issues with needing to sell significant amounts of beaten down assets during this recent market downturn. Interest, dividends and skimming a little cash when trading or rebalancing seems to do it.

To those using so-called "buckets," as long as you realize it's primarily a mind game making you feel more comfortable, hey, go for it. I've taken my master spreadsheet and reorganized it into "buckets" several times and find my holdings do indeed reorganize fairly closely into a Lucia-like scheme. I just don't care to use the jargon. My only concern is for those who don't get it and think they're actually doing something different than you could do in a traditional AA scheme.

I'm a realist and understand that the years ahead may lead to me croaking with little $$$ left and there may be scary dips along the way depending on the markets. And there is little I can do in terms of avoidance schemes which wouldn't add other types of risk. Of course, I may croak with much more $$$ than I have now, again depending on the markets. So, you pay your money, you make your choice. Then you live with it.
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Old 05-17-2008, 12:39 PM   #47
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I am not there yet on the withdrawl issue but I plan on using a 2-3 yr living expense bucket to help smooth out market gyrations and try to keep my SWR in the 2.25 to 2.75 range. I would like to make it longer but think 2 yrs is ok. The issue with this may be the inefficiency of return as to what I "could" be making. But I guess it is worth it for me to sleep well at night. At least for now til I put it into practice.

Tomcat98
I was unknowingly using a "bucket" method before I learned there was a book written about it. I doubt many here (including myself) actually bucketize per the book though. There is some inefficiency (as Tomcat mentions), but necessary for the "sleep at night" factor IMO. I try to reduce the inefficiency somewhat depending on MM and CD rates. Bucket one ranges from 3 to 5 years depending on short term rates. If rates are low (as they are now) I move cash into bucket 2 until I'm down to 3 years. Bucket 2 (taxable index funds) has roughly 8-10 years. Barring any huge disasters bucket 3 will most likely be split between the kids at some point. I realize this "bucket" stuff isn't for everyone......just adding to an interesting conversation.

As for the OP's questions.......yes, we were a bit anxious when we jumped out of the rat race (a little over 2 years now), but are now feeling better after seeing that our AA is behaving as we planned it. There have been some adjustments. We spend and conserve even more carefully now even though we may be over doing it. I just hope the kids enjoy bucket 3.
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Old 05-17-2008, 12:53 PM   #48
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Despite not using any of the common gimicks such as "buckets" or heavy doses of cash...To those using so-called "buckets," as long as you realize it's primarily a mind game making you feel more comfortable, hey, go for it.
I agree with that.

Of course, as someone who finds the Buckets analogy to be useful, I'd have worded it differently, like, "To those NOT using so-called "buckets," as long as you realize that you actually ARE using buckets and denying it, this is primarily a mind game making you feel more comfortable, hey, go for it."

But in the end it's about diversifying, having enough cash on hand to meet personal comfort needs and weather typical market gyrations. Call it what you will.

And even at age 60, few of us can say that our post-retirement nest egg has really been tested severely, yet. It'll be interesting and scary to see our collective reaction to a 2002-like event or worse. Somehow I think we'll do better than most.
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Old 05-17-2008, 01:18 PM   #49
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And even at age 60, few of us can say that our post-retirement nest egg has really been tested severely, yet. It'll be interesting and scary to see our collective reaction to a 2002-like event or worse. Somehow I think we'll do better than most.
Well, if Lucia is correct, the bucket terminology types will be doing fine.... totally confindent and assured of success. AA types will have been shown the error of their ways and will be standing in the soup lines staring blankly into space wondering why they didn't listen to Ray!
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Old 05-17-2008, 01:22 PM   #50
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Buckets or no buckets - - it's all conceptual. I am working with hazy buckets too, I suppose, though they are only separate in a diffuse way in the back of my mind. I'm really happy with my investment plan, though.

I really need to read Ray Lucia's book!
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Old 05-17-2008, 01:30 PM   #51
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Well, if Lucia is correct, the bucket terminology types will be doing fine.... totally confindent and assured of success. AA types will have been shown the error of their ways and will be standing in the soup lines staring blankly into space wondering why they didn't listen to Ray!
Actually, I was referring to most of us on the board, whether you consider yourself a bucketizer or not. I think we'll all do better than most who failed to implement the basics, whatever you choose to call it.

BTW, buckets and AA are not opposites - you choose your AA pretty much any way you please under Lucia's strategy. You set your stocks:bonds/cash by choosing your bucket 1 duration, and your equities are free to roam anywhere you want to take them in bucket 3. But that's a discussion which has already been done.
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Old 05-17-2008, 01:35 PM   #52
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I must be missing something.

It looks like the 'bucketeers', of which I am one of, use bucket number 1 to hold x to y years of funds in the most conservative of investments, MM and CDs. It's a way to ALLOCATE expense dollars for your early years, which help get you through bad market times.
AAers (which I also subscribe to), who don't bucketize seem to be at the mercy of the market, unless they have a very conservative AA (i.e. a bunch of funds (that will last x to y years) in CDs and MMs (which sorta makes them closet bucketeers, tomato, tomaato). If you use bond funds or other like investments in you AA instead of CDs and MMs, then you COULD BE at risk during the down markets.

So the difference may be in your actual allocation.
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Old 05-17-2008, 01:42 PM   #53
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So the difference may be in your actual allocation.
The difference for me is that I keep a number of years worth of spending in cash, near-cash, CD ladders and low volitility fixed investments. I'm not comfortable keeping this in a bucket, so I keep it in brokerage accounts and track it on a spreadsheet.

My beef with Lucia is not what he's doing. It's the fact he invented new jargon to be applied to already existing strategies. Just makes discussions more complicated.

Investor 1 - "With my current view of the market and because I'm going to RE, I'm increasing my cash/near -cash allocation."

Investor 2 - "Not me. But I am putting more money into bucket one."

To Ray's credit, his jargon does help some folks and could be useful. For example, DW has less than zero interest in our finances and her eyes roll when I tell her it's time for our quarterly review where I show her the spreadsheets (with pretty graphs) and review the "what to do if I croak" instruction sheets. Because of this, I keep most of our stash at Schwab where she would have access to a walk-in office, etc. and forego the opportunity of holding Vanguard Admiral Shares as a result. Given her lack of interest, I have been wondering if I shouldn't reorg the spreadsheet into a Lucia-like bucket format, give her a copy of Lucia's book and see if that helps. Absolutely nothing would change for us in our financial strategy, but the jargon might catch her interest and that would make me feel better.
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Old 05-17-2008, 02:16 PM   #54
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Yeah, jargon can be confusing and Lucia is guilty. Especially when he starts in with bucket 2A and 2B, etc.

I think the real innovation he offers is the idea of "burning through" or self-annuitization of bucket 1. This "training technique" creates the maximum possible amount of time before touching your equities, reducing the temptation to either rebalance too often or sell too often on the stock or even bond side. This technique is more than jargon, and there is some analytic support from academics and modeling, FWIW.

You do not need to call it buckets to do that, but the "cash/bonds first" strategy is one I am convinced is beneficial for many even if, like Buckets, it leaves you heavily in stocks 12-15 years after decumulation begins. By then, there'll be social security (?), pensions if you are lucky enough to have one, and maybe a SPIA to soften the AA somewhat.
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Old 05-17-2008, 02:32 PM   #55
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You do not need to call it buckets to do that, but the "cash/bonds first" strategy is one I am convinced is beneficial
I've read a couple of articles on that approach, neither one from Lucia, and find it interesting. You're right, no need for buckets terminology. I just wonder though, despite being fairly stoic about market volatility, could I stomach the variation involved in a high equity allocation that late in life? If I croaked at 74 leaving DW 80% in equities, could she handle that without using a planner (ugh) to reallocate to something more appropriate for her? Still, it's an interesing concept.
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Old 05-17-2008, 05:00 PM   #56
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So now I have to get buckets and annuities. You guys are confusing me.
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Old 05-17-2008, 05:13 PM   #57
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So now I have to get buckets and annuities. You guys are confusing me.
Just get yourself a bucketful or two of annuities and you're covered...
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Old 05-17-2008, 05:28 PM   #58
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I got a kick out of this last sentence .

What's kind of hard to manage is all those unknown expenses. You can plan for them to some extent, but emotionally it still can be a little difficult to deal with especially in a down market. For us there were things like:

$16k, new roof
$5k, replace forced air ducting
$30k, son decided to really get serious about college so we gave him old car and are buying new one
$15k/yr -- college expense
$10k, replace house carpeting

I feel your pain.

In my first year of ER:
$30k remodeled basement kitchen and bathroom, main floor bathroom and laundry

$10k replaced all kitchen appliances

$12k DW's oral surgery

$12k college expense...son

$12k 529s...grandkids

We also bought and sold property, motorhomes and took a cruise.

We are hoping 2009 is a more normal year for us as 2008 will involve selling a house; buying a house; moving expenses and some remodeling expenses at the new house. Etc.

But, it is only money and you can't take it with you or buy the return of a deceased spouse or other relative or friend. This is not to say you blow it all on one big drunken lust-filled rampage or on things that have no value in your life. It means you have different priorities for your spening and a dimmer view of your future.

"Eat, drink and be happy...for tomorrow we die." or not.

Plan like you will live to be 100 but enjoy life like you will die tomorrow. The trick is to balance the two.....just in case you DO live to be 100.
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Old 05-17-2008, 06:05 PM   #59
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Steve, bravo!
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Old 05-17-2008, 06:09 PM   #60
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IThis is not to say you blow it all on one big drunken lust-filled rampage
And the reason for that is what again?
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