Retirement income planning can feel abstract when everything sits in one large account. The Asset Segmentation Approach, also known as the Bucketing, helps bring clarity by dividing assets into time-based segments. Each bucket has a specific purpose, time horizon, and level of risk.

This approach is not a replacement for Total Return, Income Protection, or Risk Wrap strategies. It complements them. It provides a framework for organizing your income plan so you can see how different parts of your portfolio work together over time.

Key Takeaways

Divides retirement assets into short, medium, and long-term “buckets” based on time horizon and purpose
Helps retirees visualize which assets will provide income now and which are meant for later
Supports consistent withdrawals while maintaining long-term growth potential
Encourages discipline and reduces the temptation to react to short-term market changes
Can integrate multiple retirement income approaches within one coordinated plan

‘Asset Segmentation’ Building Blocks

The Bucket Approach creates structure by matching investments to specific stages of retirement. Rather than drawing from one large pool, you assign assets to time-based buckets that are gradually refilled as time passes.

Typical structure:

Short-Term Bucket (Years 1–3): Cash, short-term bonds, or structured notes used to fund near-term expenses. This bucket provides peace of mind and prevents the need to sell investments during market downturns.
Intermediate Bucket (Years 4–10): A balanced mix of bonds, dividend stocks, or structured strategies that replenish the short-term bucket over time.
Long-Term Bucket (Years 11+): Growth-oriented investments designed to outpace inflation and support later-stage or legacy goals.

As each bucket is drawn down, the next bucket refills it. This sequencing allows the retiree to maintain a long-term perspective while meeting short-term income needs with stability.

Advantages of the Asset Segmentation Approach

Clarity and Visualization: By assigning each asset to a clear role, retirees can easily see how their plan supports ongoing income.

Emotional Control: Knowing that several years of income are already set aside reduces anxiety during market volatility.

Consistency: Scheduled refilling of short-term buckets helps maintain spending patterns without panic selling.

Coordination: This framework can integrate with other income styles. For example, pensions and Social Security often fill the short-term bucket automatically, while investment accounts fund the intermediate and long-term buckets.

Adaptability: The approach can flex to suit changing goals, interest rates, or market conditions over time.

Common Trade-Offs

While bucket strategies provide structure, they require ongoing management to remain effective.
Without discipline, the plan can drift away from its intended design.

Potential drawbacks include:

Complexity: Managing multiple buckets requires regular rebalancing and coordination.
Refill Discipline: Neglecting to replenish lower buckets can weaken the long-term sustainability of the plan.

The success of this strategy depends on maintaining the balance between liquidity, growth, and replenishment. Allowing one bucket to deplete or overfill can disrupt the entire system.

A Dynamic and Flexible Framework

The Asset Segmentation approach is inherently dynamic. Each bucket can be built using a different retirement income approach depending on its time horizon and purpose.

A short-term bucket might use an Income Protection structure focused on cash flow stability.
A mid-term bucket could include a Risk Wrap approach with buffered growth or structured income tools.
A long-term bucket often aligns with a Total Return mindset, emphasizing growth and reinvestment.

The size and composition of each bucket can also differ based on personal goals, pension income, and retirement timeline. Someone with a reliable pension or other predictable income might need a smaller short-term bucket, while those relying more on market assets may allocate more there. This flexibility makes Asset Segmentation one of the most adaptable income frameworks available.

Is this Approach Right for You?

Ask yourself:

Do you feel more confident when you can visualize how income will flow over time?
Do you want to maintain market participation but avoid selling during downturns?
Are you comfortable maintaining a disciplined process for refilling buckets?

If these fit your preferences, Asset Segmentation may help you bring order and confidence to your retirement income strategy.
Now it is a matter of determining the size of each bucket and the design.

‘Asset Segmentation’ Approach to Retirement Income