Ray Lucia...Buckets of Money

[youbet]

Quote:

Originally Posted by donheff Ray would advise that the "bucket" concept is easier to properly grasp that good alllocation practices.

Ding ding ding!!!

There ya go! There is absolutely nothing new or unique about Ray's system other than the jargon. The concept of withdrawal plans that utilize a conservative asset allocation scheme coupled with significant cash balances is hardly new. Ray has packaged it "for the masses" and to the extent that it helps folks grasp appropriate allocation practices, I'm all for it.

In my own withdrawal scheme, I've got short, medium and long allocation categories and if I substitute Ray's bucket jargon, it's surprisingly similar.

I think I was confused listening to you Ray fans because I kept looking for something new beyond the jargon, names and terminology.

[Rich_by_the_Bay]

I'd encourage some of the posters to read the book instead of trying to pick up the contents piecemeal here... . For example, the bucket allocations do take into account inflation adjustment as detailed in the book. I hear he has a new edition released or soon to be.

One thing I found useful was looking at bucket 1 as a self-annuitized chunk of cash, or actually using a 7 year SPIA. It gets you out of worrying about selling shares of stock, or living off gains and appreciation of equities -- he confines your sales to the most stable and least vulnerable compartment.

Another thing I like is the "enforced" discipline which lets equities ride for 10-14 years virtually untouched, or only lightly touched.

Nothing Lucia advocates cannot be achieved through other strategies. It's just that he formats it in such a way that it is more intuitive to me.

[youbet]

Quote:

Originally Posted by Rich_in_Tampa he confines your sales to the most stable and least vulnerable compartment.

Yep. I'm doing something similar, although not because of Ray. After reading the recommendations of several of the popular financial authors/"gurus," as I neared retirement, I increased my cash/near-cash holdings and use those to fund current expenses. I have about a year (5%) in MM and a few years in CD ladders, bond ladders and a short duration bond fund. I replinish by rebalancing and from dividends. That is, I sell equities that have appreciated from time to time. As in virtually all rebalancing schemes, there is no selling of equities in a down market.

Ray has done a nice job of packaging this common practice into an easily understandable format with catchy jargon. Good work on his part.

Quote:

Another thing I like is the "enforced" discipline which lets equities ride for 10-14 years virtually untouched, or only lightly touched. Nothing Lucia advocates cannot be achieved through other strategies. It's just that he formats it in such a way that it is more intuitive to me.

Actually, there is nothing he writes that is actually unique or new except the packaging. And, he's done a good job at that. It's clear from all his fans on this board that he laid it out in a manner they can understand and vision executing.

One thing I do wonder is whether you will actually have the same equities 14 years after you start, untouched. Or, will you discover infrequent opportunities to judiciously churn things a little based on the changing economy and opportunities?

Ray won't have to worry about that. In fourteen years, he'll be happily retired and out of the advising and authoring business.

[Brat]

Yes, but even Lucia likes 4% withdrawal.

I think you have captured the essence of the bucket system. Whether it is new or unique isn't important, there is little 'new' under the sun. What is important is that it is new to me and I get it.

Bucketing at 4% is like belt and suspenders, just the pants insurance those of us in retirement find useful.

Remember, some of us are aging and face the reality that we will need to simplify our investment process on down the road. Leaving instructions about this method will help to insure that our bills will be paid with our investments. This concept is easily communicated.

[youbet]

Quote:

Originally Posted by Brat What is important is that it is new to me and I get it.

And there's nothing wrong with that.........

[youbet]

Quote:

Originally Posted by Brat Remember, some of us are aging

Really? Wow! I'm sure glad that's not me!

[wildcat]

Just stopping by and reading up a bit. After perusing this post, I hope Ray and his "buckets" go to hell.

[youbet]

Wildcat......I'm sure Ray will take that with the good intentions you meant.

I just noticed on Yahoo:

"AP - The Dow Jones industrial average surged past its all-time trading high of 11,750.28 Tuesday, taking yet another step in its recovery from seven years of market turmoil."

For you Ray fans..... What is Ray telling you now? I know he's not a market timer, but he does recommend "dribbling" from bucket three into bucket two while the market is high. So, are you doing so now?

For you not-Ray fans...... I'm hanging tough but wondering if it isn't time to do a little rebalancing and harvest a little of this.

[d]

Quote:

wondering if it isn't time to do a little rebalancing

it's always time to do a little rebalancing!

[REWahoo]

Quote:

Originally Posted by d it's always time to do a little rebalancing!

So.... Are you suggesting we're all a little unbalanced?

[youbet]

Quote:

Originally Posted by REWahoo! So.... Are you suggesting we're all a little unbalanced?

[hogwild]

FYI, Ray's new book "Ready...Set...Retire!: Financial Strategies for the Rest of Your Life" is supposed to be out in March.

[JohnEyles]

Quote:

Originally Posted by donheff Remember: you don't need a full 7 x yearly expenses because the bucket will be appreciating at a fixed or relatively safe rate.

But that rate won't be all that much higher than inflation, since buckets 1 and 2
are in pretty conservative investments, right ? So maybe 6 years (in today's dollars) ?

[d]

Quote:

Are you suggesting we're all a little unbalanced?

moi?

[donheff]

Quote:

Originally Posted by youbet For you Ray fans..... What is Ray telling you now? I know he's not a market timer, but he does recommend "dribbling" from bucket three into bucket two while the market is high. So, are you doing so now? For you not-Ray fans...... I'm hanging tough but wondering if it isn't time to do a little rebalancing and harvest a little of this.

Both sentences call for the same thing.

[youbet]

Quote:

Originally Posted by donheff Both sentences call for the same thing.

I was trying to make that obvious, but thanks for pointing it out!

[mathjak107]

For the last few years i pretty much had 3 portfolios going each with a different time frame in mind. I had a 1-3 year ,,,4-6 and 6 years and out. Dont ask me why i used those numbers, it was just seat of my pants. How much in each ? Again seat of my pants.

Rays system filled in the missing pieces with at least some formulas and mathamatics that had at least some basis. Not a new concept as i was already doing this but it brought the fit and finish to it.

[youbet]

Well there ya go mathjack, that's great. I'm glad Ray's system is making you feel more comfortable. Feeling comfortable is pretty darn nice.

I'm more comfortable taking a single portfolio point of view, so I'm doing that.

Could you respond to my earlier question I put out to any of Ray's followers? Given that the domestic equity markets are at or near highs, are you moving money from bucket three to bucket two at this time? Is Ray's system giving you any inputs on how much "dribbling" to be doing right now?

[Rich_by_the_Bay]

Quote:

Originally Posted by youbet Could you respond to my earlier question I put out to any of Ray's followers? Given that the domestic equity markets are at or near highs, are you moving money from bucket three to bucket two at this time? Is Ray's system giving you any inputs on how much "dribbling" to be doing right now?

If I may, there seems to be a slight misunderstanding about buckets: Ray doesn't tell you what to buy for each bucket, so it is hard to answer your question from a "Ray Lucia" perspective. You do whatever you would do with any other system. Like the run-up? Then prune a bit. Prefer to ride it out? By all means sit tight. The buckets don't tell you specifically what to buy or when to sell, just the general type of asset to consider. Plenty of personalization once you get beyond that -- you can even decide to shorten your cash in favor of equities and still be bucketized.

Like others, I really like the basic framework, but my specific assets and sell/buy decisions will be very different from someone elses. It just keeps it clear what you are doing, for better or worse.

Hope that helps.

[youbet]

Quote:

Originally Posted by Rich_in_Tampa Hope that helps.

What I'm fishing for Rich, and I suppose I should launch a new thread, is whether folks are sensing equities are high and shifting out of them. Whether you call it refilling bucket one or two from bucket three, rebalancing, taking money off the table, changing your allocation percentages or whatever, anybody feeling like we may be near a top?