Retirement Investing Bucket Strategy

I've found this strategy helps people manage their emotions when investing for retirement.

Simply put, determine your essential income, then compartmentalize your investments into 3 "buckets" based on?when you will spend the money:

• Now (Less than 1 year): This should be invested in low/no volatility investments like Money Markets, CDs, or a High-Yield Savings.
• Soon (years 2-5): Invest this in moderate volatility investments like a 60/40 blend of dividend aristocrat stocks and investment grade bonds.
• Later (years 5+): This can be invested in high volatility investments like growth stocks, private equity, real estate, high-yield bonds, etc.

Remember: Higher volatility (i.e. "risk") = higher?potential?return... over time! You must remain invested for sufficient time to bridge the dip when markets go through a correction/recession/crash to realize higher returns. Long-term, the risk/reward principle is a law of finance. Research "risk premium".

The reason this works is because it helps people stay invested in their "growth bucket" because they've got a year of income in cash and another 4 years in "safe" investments.

Is this?mathematically ideal? No. With the caveat of sequence of returns risk, we should all be 100% growth invested all the time. But humans have emotions that get worked up and succumb to fear/greed cycles. This strategy helps people manage those emotions.

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Securities offered through Cambridge Investment Research Inc., a Broker Dealer, member FINRA | SIPC. This is general advice and not the right strategy for everyone. Consult with a professional before making any investment decisions.