7 Ways to Lower Your Retirement Income Risk: Cut Retirement Income Risk with the Bucket Strategy

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Longevity risk, the possibility of outliving one's money is the scariest retirement income risk. But fear of volatility causes many investors to shy away from equities and growth investments, says David Edwards, president at Heron Wealth in New York. Edward's bucket strategy apportions 60% to stocks and commodities, 30% to government and corporate bonds and 10% to short-term cash securities

When rebalancing during a stock market advance, the excess from the stock bucket goes into the fixed bucket. While the excess in the bond bucket goes into the cash bucket. This works out to roughly one year's worth of retirement income in the cash bucket and four years of income in the fixed bucket. Cash flow distributions initiate first from the income bucket and secondarily from the fixed bucket.

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