Bucket No. 1 — Investing for Safe, Reliable Monthly Income
Ray Lucia on Bucket #1
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Bucket No. 1 is the "short-term" bucket that will provide you immediate money to live on. Because you want to take zero risk with that money, you want un-risky investments that will generate income while the other two buckets grow. Among the many possibilities: Investing in immediate annuities, money-market funds, laddered CDs or Treasurys, and perhaps short-term bonds or bond funds.
You'll then spend down this money while the somewhat riskier and potentially higher-yielding assets in Bucket Nos. 2 and 3 are left to grow untouched for a number of years.
Remember, the key to Bucket No. 1 is making sure there's enough safe and liquid money available when you need it. Thus, such investments as a CD or bond ladder, bond mutual funds or floating rate funds, T-bills or I-bonds all need to be relatively short-term with maturity dates that match when you need the money. ("Short term" for Buckets of Money® purposes is defined as five to seven years.) After this short-term bucket is drained, it'll be time to tap into Bucket No. 2 money.
The result? Even in the inevitable bear markets, Buckets of Money® retirees and pre-retirees can be assured that their Bucket No. 1 will provide monthly income without worries about market volatility.