The Bucket Strategy for Retirement: Is It Worth the Effort?

[@SuperGuyAu]

Thanks for watching! I hope this video helped you understand the retirement bucket strategy and its alternatives. If you’re ready to simplify your retirement planning, don’t forget to grab your FREE 6-Step Superannuation Check at www.torowealth.com.au/6-step-super-check/. It’s packed with actionable steps to help you optimise your retirement strategy.

[@Christine-yx4wj]

I learn so much from you Chris. Also telling people to watch you

[@frostie260]

Interesting post as always. I like a two bucket plan. Five years of costs in one bucket in cash, to cover any bear markets. Rest in growth… I only need to touch the cash bucket when there is a bear market. That way there isn’t much fiddling to do between buckets. Cash might need a top up, after a bear market ends.

[@megazone128]

Having funds in a pre mix option is certainly easier for sure but does not allow you to strategically select which bucket of funds to draw down on in accordance to market conditions and returns.

[@garrysmith4454]

I use a 2 bucket strategy. Majority of funds in balanced and growth areas in superannuation and up to $10,000 a year transferred into savings account. On top of pension, this works for us.

[@user-Aa310]

Great video Chris. However I utilise the bucket strategy as I do not have fixed retirement goals, am very hands-on with my portfolio and acknowledge there is a great deal of uncertainty in life (especially currently with geopolitical risks and issues).

[@caromarco6315]

Always something to learn and think about!

[@DoDar]

Great stuff Chris. Well explained and in simple terms. Hey, do you know of a super calculator that factors in 3 years of the brought forward rule (inheritance) and also adding to super later on using downsizer contribution? Thanks Randall

[@w0mblemania]

Seems to me that the Bucket Strategy is promoted and used mostly by Americans, who have a very different (and somewhat deficient) retirement system than Australia's. Since most of our retirement system is based around Superannuation (and owning a home), it does seem much more practical to leverage Super for the "bucket", than maintaining your own buckets.

[@Woodland26]

The first time I heard about buckets is that you try not to kick it.

[@PaulJones-wh2ml]

The biggest risk in our super system is sequencing risk at or around the time of retirement. If you had your super all in high growth and retired just prior to the GFC you would never recover your capital. 40 % loss as well as mandated drawdowns. I favour 3 years of drawdowns in cash which are drawn on to pay your account based pension. The remainder is invested in growth assets. You can transfer some of the investment returns from the growth assets to the cash account when the growth assets have a good year of returns. This strategy is not risk free but does mitigate some of the sequencing risk around the time of retirement.

[@DeeJay-t2g]

The transfer balance cap is currently $1.9m and as I understand this is the max you can transfer into pension phase. My question is, what happens to the remainder left in accumulation after retirement and how do you get hold of it. Also what are the tax implication for those with more than $2m but less than $3m at retirement.

[@Woodland26]

from what I understand, the amount after maxing out on TBC is still in accumulation status where if you reach the condition of release can access. Taxed at 15% on its earning, not sure about CGT status. No need to have compulsory withdrawal from it. Can take lump sum out if desired.

[@gerrym75]

The remainder of your balance stays in the accumulation account, and you can withdraw from this money as a lump sum payment as you require. Keep in mind that the earnings you receive from this balance are taxed at 15%, as opposed to the earnings in an allocated pension which are tax free. From a personal tax liability perspective, I can't comment so will leave it to Chris to answer

[@stjmrad]

As caps are individual, make sure you split super with spouse, so you each have $1.5M

[@viljoenjj]

Does the example at 06:15 assume some other income like age pension? $500k on it’s own is not going to provide $50k pa (increasing every year with inflation) for 30 years at 6% return pa.

[@gordon.Jacko1055]

Yes, I agree with you. I just let my super fund handle it. 😊

[@TheWoodworkerwhopaints]

I have never used the bucket system myself. Having some easy access reserve of money is a good theory though that you can tap into when markets drop so you don't have to sell your higher growth, longer term assets at the worst possible time. I have always used and have been the big advocate of paying yourself and your investments FIRST, and this has worked extremely well for me. Most people will do the opposite and try and save/invest at the end of their pay cycle when they have paid everything else and had temptation to spend through the whole pay period. They usually end up with (surprise, surprise !) nothing to save and end up living from pay packet to pay packet.

[@c.s2001]

And tell me, what happens when you kick the bucket?

[@icucmerc]

Don't simply retire from something; have something to retire to. Start saving, keep saving, and stick to investments. Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments

[@Rick-kj9dd]

I don't like this bucket strategy at all. I'm currently receiving 4.80% to 5% on substantial term deposit money and living off the interest plus dividends. I doubt that fixed interest or conservative managed fund returns over a 2 to 4 year period will out perform term deposit rates and also would incur higher risk. Also if you're replenishing funds into bucket 1 from bucket 2 you're potentially withdrawing any growth from bucket 2. Same goes from bucket 3 back into bucket 2. Your withdrawing returns that if left alone would have continued to compound. Isn't that the aim of bucket 3. Whole concept is too vague and bad process in my opinion.

[@andymacmac9151]

The concept is I think fine, it’s just hard to implement within a superannuation structure…. It works well if you hold money in seperate financial products /structures and are not required to draw down a regulated minimum percentages each year…. In a bad year or years in a downturn, there is no guarantee that the government would reduce the minimum withdrawal rates from super….

[@marjan8888]

We are planning on living on our 2 commercial property rents ( $130 k per yr)while keeping our SMSF managed funds (approx $2 million by retirement)in growth strategy and spend all its growth per yr.The thing is ,I’ve been such a tight arse most of my life I can’t see myself spending all of this😢.Then on top of all this there is a $1 million inheritance coming from my mother eventually.

[@1985tris1]

I personally aim to have a super or networth savings that does not on average decrease with inflation. So 500,000... 50,000 per year in my books is a 10% withdraw rate. I need to max out my super (2million plus) to acheive my aim. Then i can still have high growth investments without worrying too much

[@halitosis75]

I have about 5 buckets

[@Brian-vs9sd]

I have 6. Strategically placed to capture the leaks in the roof. 😜

[@halitosis75]

@Brian-vs9sd if you have a l3aking roof, supa isn't a priority for you haha 😆

[@bornufree]

What colour are they?

[@Brian-vs9sd]

@@halitosis75 that's not what the government thinks. 😂

[@Brian-vs9sd]

@@bornufree mine are red. To match my financial statement.