It is virtually impossible to properly budget an allowance for a large expense that comes every 7 years. What can you do, transfer money from your portfolio to a savings account each month? In truth, you don't have "buckets" -- what you have is one pot of money, your total net worth. An attempt to assign different parts of it into different buckets is just a mirage.
So....decide on your asset allocation. When you withdraw money, maintain your desired AA -- no matter if you take it out monthly or at 7 year intervals. Just make sure your average draw fits into the 4% rule.
Or you can do what I did for a car. Finance it with a 1.99% loan from PenFed, making your "new car fund" be after you buy the car rather than before.
Budgets, separate accounts, asset allocations -- all seems confusing to me.
I made up a 2014 Budget in November 2013, as this is my first year in retirement. I'm not very good with spreadsheets or accounting ledgers or entries, but I do track spending and expenses at mint.com and from my credit card statements. My budget was just an estimate of expenses for the year. I don't have to worry about shortfalls or funding my budget because (1) I have enough pension income from a stable source to fund my projected 2014 Budget and years beyond, and (2) I have enough capital/net worth as well as liquid assets to meet any additional expenses even if my projected budget for 2014 and years beyond blew up. Indeed, my gut tells me if I were to discount to present value the entire pension income stream for 30 years, I'd still have surplus at current budget levels for future years. I don't currently fund any expenses from any dedicated accounts, except I began recently to start funding a specific medical expense from my HSA.
What I found in my 2014 Budget, in the first few weeks of this year, is that I probably significantly underestimated medical expenses for body repairs and maintenance. As we age, the body does break down and I'm finding my wife and I are beginning to decline and the body needs additional maintenance and repairs. I had reserved around $13K for medical expenditures (insurance premiums for health, dental and LTC, out-of-pocket expenditures for major surgery or dental care not fully covered by insurance, fitness apparel and memberships, prescription drugs, etc). I'm finding that parts of our bodies requiring dental implants, perhaps additional knee surgery, hearing aids, etc, spike up the expenses for this year. And who knows what needs repair in the future. BTW my insurance coverage is excellent, in my view. Also, the HDHP-HSA is working for me in an optimal fashion; and my dental insurance is excellent, including significant coverage for dental implants too.
I'm finding that going forward in the future, I might just as well reserve/specify $17K a year for all medical expenses; some years I'll be over that amount if major repairs occur; some years I'll be significantly under that amount if we're healthy and no surprises. I know this is an individual thing, but anyone here reserve for medical expenses and what annual levels have you specified? I'm not religious about budgets and retirement funding, though I think budgets in general are helpful planning tools.