Buckets or Pies: Which Retirement Strategy Works for You?
The standard investing methods have their virtues (and shortcomings), but the key is to apply them thoughtfully and with some flexibility.


As fee-only financial planners, the overriding concern we hear from people approaching retirement is “will I have enough to live on?” Followed closely by “how can you make my money grow, without exposing it to a lot of risk?” After the dramatic economic downturn in 2008, even the most confident investors can become a bit skittish when they think about relying on their investments for the next 20 or 30 years.
I get concerned when I look at the financial planning industry and the simplistic solutions that it typically offers people.
It seems that a majority of investment firms and advisers default to the traditional methods of statistical backtesting, mean-variance optimization and plotting portfolios along the “efficient frontier” in an attempt to deliver acceptable performance (and if these terms mean nothing to you, don’t worry, they don’t mean a lot to the people who spout their virtues either).

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Now, I’m not saying that there isn’t validity in some of these methods. It is important for competent advisers to understand them, and to also understand their shortcomings.
While any or all of these tools may work well for people in their earning and investing years, they may set up some individuals for an emotional and anxiety-ridden retirement if they are in the hands of an inexperienced adviser.
While the traditional pie-chart approach to investing has its virtues, such as being able to see at a glance how well a portfolio is diversified, it typically is used as data to develop an expected rate of return, and to evaluate how closely it matches an “efficient” portfolio, a la the following image (to give you an idea of how prevalent this theory is, it took me about two seconds to find this on Google):
And here's another view:
There are myriad problems with an over-reliance on this approach, not the least of which is that in any given time frame, the assumptions in these charts could get upended. How do you think this last chart would have looked in the 1970s and ’80s when interest rates approached 14%, and the historical risk on bonds was similar (hint: a lot different than this chart, considering bonds’ returns were higher than stocks’, just as they were in the middle of the 2000s). How prudent would it have been to tightfistedly hang on to a set asset-allocation policy back then?
This problematic thinking is not a concern for every investor, as some have adequate sources of outside income (pensions, state or government retirement systems, etc.) or significantly more assets than they could ever use in their lifetimes. But for the person who has just enough of a portfolio to supplement his or her retirement in addition to Social Security, it may be an approach that keeps them up at night.
For this client, we recommend the use of a “bucket” strategy. A bucket strategy basically breaks down the projected income needs of the client into segments with varying time frames, depending on his or her expected future goals and needs. Different risk and return assumptions are assigned to each segment relative to the need to be more conservative or aggressive. So a person my have a portfolio with four buckets assigned to it — cash and very conservative investments in the first bucket to get them through the first X years of retirement, followed by a balanced bucket, a moderate bucket and an aggressive bucket.
Now, we can adjust the investment vehicles in these buckets based on economic conditions and forecasts, and also move assets between buckets as needed.
The idea is to commit only the assets that are needed in the near-term to more stable investments, and to reserve more aggressive holdings for later years.
Sample page from a bucket retirement income strategy report:
In addition to being a very practical approach, the bucket strategy tends to make sense to people who don’t spend a lot of time in the financial markets, while also putting their minds at ease. Obviously, you could take this and develop an overall rate of return needed for the portfolio, but there can be a world of difference in concept and understanding. Also, as neat as this looks, it can get a little challenging when applying the strategy across taxable and tax-preferred accounts. One of our goals is to maximize the tax advantages of our retiree client portfolios, so we have to be careful about which assets go where.
In summary, we’ve found that both approaches work, depending on the client’s circumstances, and as long as periodic evaluations and adjustments are made. There are, however, certain indicators that we look for when recommending one strategy over another, as when it comes to retirement income planning, one size does not fit all.
Doug Kinsey is a partner in Artifex Financial Group, a fee-only financial planning and investment management firm based in Dayton, Ohio.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Doug Kinsey is a partner in Artifex Financial Group, a fee-only financial planning and investment management firm in Dayton, Ohio. Doug has over 25 years experience in financial services, and has been a CFP® certificant since 1999. Additionally, he holds the Accredited Investment Fiduciary (AIF®) certification as well as Certified Investment Management Analyst. He received his undergraduate degree from The Ohio State University and his Master's in Management from Harvard University.
-
Ask the Editor — Tax Questions on the New Senior Deduction
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the new $6,000 deduction for taxpayers 65 and older.
-
These Summer 2025 Back-to-School Tax-Free Weekends Are Starting Now
Sales Tax Over a dozen states offer back-to-school shoppers a sales tax holiday this summer.
-
Do You Need Flood Insurance? I'm an Insurance Expert, and Here's Where You Can Get It
Standard homeowners insurance does not cover flood damage, so you might need separate flood insurance, which you can get either through FEMA or private companies. Here are the details.
-
I'm an Investment Professional: These Are the Three Money Tips I'm Giving My College Grad
College grads can help set themselves up for financial independence by focusing on emergency savings, opting into a 401(k) at work (if it's offered) and disciplined, long-term investing.
-
New SALT Cap Deduction: Unlock Massive Tax Savings with Non-Grantor Trusts
The One Big Beautiful Bill Act's increase of the state and local tax (SALT) deduction cap creates an opportunity to use multiple non-grantor trusts to maximize deductions and enhance estate planning.
-
Know Your ABDs? A Beginner's Guide to Medicare Basics
Medicare is an alphabet soup — and the rules can be just as confusing as the terminology. Conquer the system with this beginner's guide to Parts A, B and D.
-
I'm an Investment Adviser: Why Playing Defense Can Win the Investing Game
Chasing large returns through gold and other alternative investments might be thrilling, but playing defensive 'small ball' with your investments can be a winning formula.
-
Five Big Beautiful Bill Changes and How Wealthy Retirees Can Benefit
Here's how wealthy retirees can plan for the changes in the new tax legislation, including what it means for tax rates, the SALT cap, charitable giving, estate taxes and other deductions and credits.
-
Portfolio Manager Busts Five Myths About International Investing
These common misconceptions lead many investors to overlook international markets, but embracing global diversification can enhance portfolio resilience and unlock long-term growth.
-
I'm a Financial Planner: Here Are Five Smart Moves for DIY Investors
You'll go further as a DIY investor with a solid game plan. Here are five tips to help you put together a strategy you can rely on over the years to come.