Bucket No. 2 — The Relative Safety Bucket
Ray Lucia on Bucket #2
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While invested for safety, Bucket No. 2's mid-term investments—only slightly more risky—provide the potential for a higher return than the money in the first Bucket. This means that when Bucket No. 1 is depleted, and you empty Bucket No. 2 into it, you should be able to "pay" yourself a higher monthly income to keep abreast of inflation.
So Bucket No. 2 buys you yet more time to go for the long-term growth in Bucket No. 3.
You neither want nor need to take excessive risks with your Bucket No. 2. So focusing on higher-yielding fixed-income securities there is what usually makes the most sense. Virtually hundreds of such options exist for Bucket No. 2, and a Buckets of Money® advisor can help you select from a range that includes certain kinds of annuities, mid-term corporate bonds or bond funds, federal-agency funds, and structured products.
Once again, the key is matching the investment's maturity date to the time when the money will be needed. And once this bucket is set up, it's advisable not to tinker too much with it. It'll be on automatic pilot, safely building income for that day when you need to replenish your Bucket No. 1.