Variation on the Bucket Strategy

NoMore

I think I probably am more risk adverse than you @Bostonerimus1.  I'm not looking for significant growth from my growth funds - I don't think I need it.  What I need is to be able to sleep at night, and the inclusion of a significant proportion of bonds (and other non-equity elements) will hopefully allow that.

This just seems to me you should just get a annuity and not worry so much about a bucket strategy

Bostonerimus1

TSCati said:

Bostonerimus1 said:

Yes there seems to be a lot of duplication in the OP's portfolio and I think a fun weekend spent going over the asset allocations would be useful. What is a bit puzzling to me is the inclusion of bonds in the growth bucket, I'd be all in on equities there, and also the choice to use so many investment trusts. That might be just a personal preference for some more active management, but there should be some considered reason for each holding and thinking about that should also be part of that "fun weekend". I don't use a bucket strategy myself, but I think there is room for some simplification and maybe some cost savings in the OP's implementation. FYI if I was thinking in a "bucket strategy" way I'd use cash a few index funds. Here are some examples, admittedly from a US perspective, but there are many UK appropriate index fund alternatives for the US ones mentioned.

https://www.morningstar.com/portfolios/tax-deferred-retirement-bucket-portfolios-minimalist-investors

I'm in a similar situation to the OP, a small income need relative to portfolio size, and my approach to income generation from my largely equity index portfolio is to simply sweep the dividends into a spending account. I get the impression that the OP is a little more risk averse than me so this approach might not be right for them, but it's good to remember the old standby of dividends from equities in any plan rather than just hiding them inside some "income fund", part of most equity funds' growth is reinvested dividends.

I think I probably am more risk adverse than you @Bostonerimus1.  I'm not looking for significant growth from my growth funds - I don't think I need it.  What I need is to be able to sleep at night, and the inclusion of a significant proportion of bonds (and other non-equity elements) will hopefully allow that.

I've learnt a lot from this forum over the last few years, thanks to the folk who provide comments and discuss scenarios. I'm grateful for the comments on this post and the feedback will certainly help improve my portfolio going forward.  Thank you.

Part of the bucket strategy is to have the long term bucket, ie 15 years and longer, in equities so it can grow, with the other buckets being used for cash and fixed income. It also helps to organize your withdrawals. Of course this is all really just another way to think about asset allocation so whether the bonds you think of as being in your long term bucket are in there or really in bucket 2 is just a case of perspective. I agree with other posters who have suggested you consider an annuity and I think you really need to look at the costs of your portfolio and the overall asset allocation and potential of asset redundancy.

TSCati

FIREDreamer said:

Try not to be too much of a Robin Hood Cymraeg though!

Pob lwc.

Diolch @FIREDreamer!

As Y Trwynau Coch almost said:
Ta beth eich barn
Ta beth eich blaid
Cofiwch am y Robin Hood Cymraeg ...

TSCati

NoMore said:

This just seems to me you should just get a annuity and not worry so much about a bucket strategy

Fair point.  Not sure my kids would agree though!

FIREDreamer

TSCati said:

FIREDreamer said:

Try not to be too much of a Robin Hood Cymraeg though!

Pob lwc.

Diolch @FIREDreamer!

As Y Trwynau Coch almost said:
Ta beth eich barn
Ta beth eich blaid
Cofiwch am y Robin Hood Cymraeg ...

Fedri di ddim defnyddio eu gair go iawn rwan!

You can’t use the actual word they used any more. It’s still played on the radio occasionally though.

LHW99

TSCati said:

NoMore said:

This just seems to me you should just get a annuity and not worry so much about a bucket strategy

Fair point.  Not sure my kids would agree though!

Unless you tell them how to organise their finances, I'm not sure they need to have any input on yours

Bostonerimus1

TSCati said:

NoMore said:

This just seems to me you should just get a annuity and not worry so much about a bucket strategy

Fair point.  Not sure my kids would agree though!

Don't let the kids come between you and a retirement financial plan. A life time annuity is longevity insurance and a fixed term annuity can be used to bridge gaps between retirement and income streams like SP and DB pensions starting. They can replace the fixed income allocation in your portfolio and with them guaranteeing a minimum level of income you can take more risk with the rest of your portfolio. They come with compromises if you compare them on a financial basis to things like stocks and bonds, but you are buying more of an insurance product so you have to factor in peace of mind.

FIREDreamer

Bostonerimus1 said:

TTSCati said:

NoMore said:

This just seems to me you should just get a annuity and not worry so much about a bucket strategy

Fair point.  Not sure my kids would agree though!

Don't let the kids come between you and a retirement financial plan. A life time annuity is longevity insurance and a fixed term annuity can be used to bridge gaps between retirement and income streams like SP and DB pensions starting. They can replace the fixed income allocation in your portfolio and with them guaranteeing a minimum level of income you can take more risk with the rest of your portfolio. They come with compromises if you compare them on a financial basis to things like stocks and bonds, but you are buying more of an insurance product so you have to factor in peace of mind.

Hwn ^^^^

This ^^^^

Linton

One important factor to be considered is flexibility.  Annuity is a good idea for your essential needs if they aren't covered in any other way.  On the other hand you cant undo an annuity - if you want an expensive one-off purchase at some time you dont want to have to save up for 20 years.W hereas a bucket strategy can enable you do do something on the spur  of the moment.

FIREDreamer

Linton said:

One important factor to be considered is flexibility.  Annuity is a good idea for your essential needs if they aren't covered in any other way.  On the other hand you cant undo an annuity - if you want an expensive one-off purchase at some time you dont want to have to save up for 20 years.W hereas a bucket strategy can enable you do do something on the spur  of the moment.

Or do both. I annuitised about 2/3 of my drawdown pot to give me an adequate income on top of my DB that i don’t need to worry about retirement and I get a state pension in 7 years (means testing unlikely this soon unless they want more discontent) and I have a drawdown pot for any extras - not touched yet.