financial planner Stephen Zelcer

Q&A – Funding & Replenishing the 10-year bucket

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Q&A - Funding & Replenishing the 10-year bucket


Hi Stephen,
I set up the 10-year conservative bucket, as you instructed.  It represents 10-years of investment income.  I love the idea! 

I just had some questions:  When do I draw income from the conservative bucket, and do I need to replenish the conservative bucket as some point?  If yes, how?  

Also, assuming I need to replenish the conservative bucket, will the conservative bucket need to grow to reflect inflation? 


Great job!

The conservative bucket will buy you 10-years of time, should there ever be a market downturn. This means, if the market tanks, you don’t have to worry about investment income for 10 years! Powerful stuff!

When you draw income in retirement you will need to be strategic:

  • When the market has appreciated by the income you need, you should withdraw from the growth bucket, not the conservative bucket.
  • When the market has lost value, don’t draw from the growth bucket, but instead from the conservative bucket.
  • When the market has grown but not by the full amount, you can draw whatever growth from the growth bucket, and the difference should be drawn from the conservative bucket.

You can gradually replenish the conservative bucket after the growth bucket has been restored to its original value. In essence, you’re going to view the original value as the “principle” and you want to preserve that level of principle as best as possible.

Regarding your question of replenishing the 10-year bucket to factor in inflation:

The original 10-yr bucket already has inflation built in. Meaning, we looked into the future at what your first 10-years will cost, and determined the bucket based on that.

Over time, the 10-yr bucket will be growing with whatever G/F fund performance you get.

If you deplete the 10-yr bucket, even partially, you will need to eventually replenish it. Yes, you are correct that the new 10-yr horizon may need an even larger 10-year bucket, but that is something you can re-evaluate every few years. After a few years, some expenses may go up or down, and longevity is not as long as it used to be. Life happens.

Also, important to remember, that 10-years is statistically an over-padding. So, even if you keep the original 10-year dollar amount, you’re still in good shape.

Everything I described above is part of our asset management services: the income withdrawals, the replenishing of the 10-year bucket, and the yearly reviews to reassess your portfolio and your overall financial plan.

I hope this helps!


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