Retirement Bucket Strategy Calculator
The three buckets, the spending, and the fall you are insuring against
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Long-range scenario, not a guarantee. Small changes in returns, inflation, fees, taxes, and withdrawal timing can materially change the result.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the annual spending the portfolio has to cover, AFTER Social Security and any pension. That is the denominator of the whole page: the buffer is measured in years of it.
- 02
Enter the three buckets — cash, money market and short CDs in bucket 1; bonds and bond funds in bucket 2; stocks and stock funds in bucket 3. Together they are one portfolio, and the page never asks you to add money to it.
- 03
Enter the years of retirement to run and the inflation the spending rises with. The buffer in years does not need a horizon, but the comparison against a plain rebalanced portfolio does.
- 04
Set the return on each bucket. The comparison portfolio is deliberately not a field: it is the same money at the same equity share with the cash sleeve folded into bonds, rebalanced annually, so the two runs differ in the cash and nothing else.
- 05
Open Advanced options for the fall you are insuring against — how far stocks drop and over how many years, starting the day you retire. Then read the buffer in years, what the cash costs on a smooth path, what it earns through the fall, and the return the equity bucket must produce to keep refilling it.
Formula
The buffer is not a division. Years of spending = how many rising annual costs a pot covers before it is empty: subtract $48,000, then $48,000 × 1.03, then × 1.03² and so on, keeping the fraction of the year the remainder covers. $120,000 of cash covers 2.4 years of $48,000 spending at 3% inflation; $450,000 of cash and bonds covers 8.4. Each year of the run then goes: spending comes out of cash, then bonds, then equities if both are empty; each bucket earns its return; cash is topped back to its inflation-indexed target out of bonds; and bonds are topped back out of the equity bucket's GAIN for that year and no further — so in a falling year nothing is sold at all. The comparison portfolio is the same total at the same equity share with the cash sleeve folded into bonds, withdrawn pro rata and rebalanced every year. The fall is spread evenly: a 35% drop over 3 years is (1 − 0.35)^(1/3) − 1 = −13.4% a year, applied from the day you retire. The refill rate the equity bucket must produce is simply your spending ÷ the equity bucket.
Example
$48,000 of spending, $120,000 in cash, $330,000 in bonds, $750,000 in equities — $1,200,000 in all, 10% cash, 27.5% bonds, 62.5% equities. The buffer is 8.4 years, 2.4 of them in cash. The scenario is a 35% fall spread over the first three years, −13.4% a year. Year one: cash pays the $48,000 and is topped back to $123,600 out of bonds, bonds fall to $296,130, equities drop to $649,679 — and not a share is sold, because the harvest rule only takes the equity bucket's gain and there is none. By year three equities have bottomed at exactly $487,500, the full 35% fall, with the buffer still intact. From year four the 8% return produces $39,000 a year of gain, every dollar of which is harvested into bonds, so equities sit at $487,500 while the bond bucket slowly loses ground to a spending figure rising at 3%. Cash runs out in year 20 and the equity bucket starts funding spending directly — the failure mode rather than the plan — and the run ends at $153,230 against $117,422 for the same money rebalanced annually with no cash sleeve. On a smooth path with no fall at all those two swap places: $1,917,025 against $1,955,553, and the $38,528 difference is what the insurance cost.
Definitions
- Buffer
- The number of years of spending that cash and bonds cover between them before an equity would have to be sold. Measured against a spending figure that rises with inflation, not a flat one, which is why it is shorter than a plain division suggests.
- Cash drag
- What the cash sleeve costs when no market fall arrives: the gap between the bucket portfolio and the same money at the same equity share, rebalanced annually with no cash. Here $38,528 over 25 years.
- Refill rule
- How the buckets are topped back up. Cash is refilled from bonds to an inflation-indexed target; bonds are refilled only out of the equity bucket's gain for that year, so nothing is sold in a falling market. Without a refill rule a bucket plan is just a portfolio with labels on it.
Good to know
Years, not percentages
The bucket approach is popular for one reason that has nothing to do with arithmetic: it answers in a unit people can actually reason about. Nobody knows whether 40% in bonds is enough. Everybody knows whether seven years of spending is enough, because seven years is longer than any bear market they can remember. That translation — from an allocation to a length of time you could go without selling a share — is what the strategy is really selling, and it is why this page reports the buffer as its headline instead of a percentage. On the default run, $120,000 of cash against $48,000 of spending is 2.4 years, and adding the $330,000 bond bucket takes the buffer to 8.4 years. The conventional shape is two to three years in cash and five to eight across cash and bonds together, so that portfolio sits squarely in the normal range. What a buffer of that depth is sized for is worth being precise about. The 2000-02 fall took about three years to play out and the 2007-09 one about a year and a half — but the recoveries took roughly seven and five years respectively, and a buffer sized for the fall is not the same as one sized for the recovery. Eight years covers both of those; it would not have covered 1966, when stocks went nowhere in real terms for sixteen years. There is no depth that covers everything, which is the first honest thing to say about the strategy: it converts an unbounded risk into a bounded one, and the bound is a choice you are making rather than a guarantee you are buying.
The mechanism is the refill rule, not the labels
A bucket plan without a refill rule is a portfolio with sticky notes on it. The rule is what makes the buckets behave differently from any other allocation, and it has two steps. Spending comes out of cash. Cash is then topped back to its target out of bonds. And bonds are topped back up only out of the equity bucket's GAIN for that year — never out of its principal — so in a year when equities fell, nothing is sold at all and the buffer absorbs the spending instead. That last clause is the entire strategy. Selling equities down to a nominal target in a falling year, which is what a naive reading of 'rebalance the buckets' would do, strips the growth sleeve bare in exactly the market the buffer exists to sit out. Watch it work on the default run: through a 35% fall spread over three years, the equity bucket falls from $750,000 to exactly $487,500 and not one share is sold, because there is no gain to harvest. From year four the 8% return produces $39,000 a year, every dollar of which is harvested into the bond bucket — so the equity bucket sits flat at $487,500 for years while the buffer is being fed. There is a second target that moves, and it moves for a reason: the refill targets rise with inflation. A buffer shrinks even when nobody spends it. Year one of the default run costs $48,000; at 3% inflation year ten costs $62,629 and year twenty $84,168, so a bucket sized as 'three years' today is under two and a half years within a decade unless it is topped up in real terms. This is also why the buffer in years is computed by spending the pot down against a rising cost rather than by division: $120,000 ÷ $48,000 is 2.5, but $48,000 followed by $49,440 leaves only 44% of a third year, so the true answer is 2.4. The gap widens with the horizon and with inflation.
The honest arithmetic: the cash costs money
The academic literature keeps finding that a fixed allocation, rebalanced annually, beats a bucket approach — and the finding is correct, provided the comparison holds risk constant. This page builds that comparison deliberately: the same total money, at the same equity share, with the cash sleeve folded into bonds and the whole thing rebalanced every year. On a smooth path with no fall at all, that portfolio finishes at $1,955,553 against the buckets' $1,917,025 over 25 years. The cash costs $38,528. It is not mysterious — the buffer is a permanent holding of the lowest-returning asset you own, and most of the time no fall arrives to justify it. Run the 35% fall instead and the ledger reverses: the buckets end at $153,230 against $117,422, $35,808 ahead, because they were not selling equities in the years equities were down. Those two figures side by side are the whole trade. The drag is certain and the benefit is contingent, which is another way of saying this is insurance, and insurance loses money on average. There is a trap in the instinct to fix the drag by making the buffer deeper in cash. Move $120,000 from bonds into cash on the default run — $240,000 cash, $210,000 bonds — and the buffer does not move at all: still 8.4 years, because cash and bonds fund it together. The drag more than doubles, to $94,014, and the ending balance through the fall FALLS from $153,230 to $131,737. Deepening a buffer means adding to cash and bonds together at the expense of equities, which costs growth; shuffling between them costs return and buys nothing. Which leaves the real case for the strategy, and it is worth stating plainly rather than dressing up as arithmetic. The rebalanced portfolio only wins if you actually rebalance — which means buying more equities in the month everything is falling, with your own money, having watched the balance drop 35%. Almost nobody does. A retiree who knows there are eight years of spending sitting in cash and bonds does not sell at the bottom; a retiree watching one number fall very often does, and a plan abandoned at the bottom costs more than any drag on this page. Read the $38,528 as the fee for a rule you will actually follow.
What the buckets cannot fix
A buffer changes the order in which sleeves are emptied. It cannot rescue a withdrawal rate the portfolio was never going to support. Set a fall deep enough or long enough and both structures fail together — a 50% drop spread over six years empties the bucket portfolio and the rebalanced one in the same year on the default inputs — and at that point which structure failed more elegantly is not the interesting question. Settle the spending first, on the pages that own that question, and come back to structure afterwards. The second limit is that the equity bucket has to be big enough to keep feeding the other two. The test is one division: your spending divided by the equity bucket, which on the default run is $48,000 out of $750,000, or 6.40% a year, against an assumed 8% return. That is comfortable. If it were not — if the refill rate exceeded what the growth sleeve can plausibly earn — the buffer would be funded out of principal and would shrink every year regardless of what the labels said. It is a far more useful test of an allocation than any percentage. Third, and largest, is what the page does not model at all: tax and account location. Cash held inside a traditional IRA is ordinary income when it comes out; the same cash in a brokerage account is barely taxed. Equities in a taxable account get capital gains treatment and a step-up in basis at death; the same equities in an IRA come out as ordinary income at whatever rate you are in. So WHERE each bucket lives can matter as much as how big it is, and a plan that gets the sizes right and the locations wrong is not obviously better than one that does neither. From 73, required minimum distributions force money out of the pre-tax accounts on a schedule that has no interest in your bucket structure, usually from the wrong sleeve. And finally, the buckets are one portfolio described a different way — the default run is 63% equities, 28% bonds and 10% cash, and a reader who describes it that way is describing the same account statement. Nothing here changes what you own. What it changes is which sleeve the next cheque comes out of, and whether you can leave the equities alone while the market is falling.
Frequently asked questions
How many years of spending should be in cash?
Most bucket plans run two to three years in cash and five to eight across cash and bonds together. The default run here sits exactly there: $120,000 of cash against $48,000 of spending is 2.4 years, and adding the $330,000 bond bucket takes the buffer to 8.4 years. That is a shape built for an ordinary bear market rather than for 1966. The number that matters is the pair, not the cash alone — a bond fund can fall too, as 2022 reminded everyone.
Why does it say 2.4 years when $120,000 ÷ $48,000 is 2.5?
Because year two costs more than year one. The page spends the bucket down against a rising figure instead of dividing: $48,000 in the first year and $49,440 in the second leaves $22,560, which covers 44% of the third year's $50,923. That is 2.4 years, and the plain division overstates the buffer by more the further out you go and the higher inflation runs. It is also why the refill target on this page rises with inflation rather than sitting at the number you typed — a bucket sized as three years today is under two and a half in a decade.
Does the bucket strategy actually beat a plain rebalanced portfolio?
Not on arithmetic, and yes on the scenario it was built for. Give the market a smooth path with no fall at all and the same money at the same 63% equity share, rebalanced once a year with no cash sleeve, finishes at $1,955,553 against the buckets' $1,917,025 — the cash costs $38,528 over 25 years. Run the 35% fall instead and the buckets finish at $153,230 against $117,422, $35,808 ahead, because they were not selling equities in the years equities were down. The drag is certain and the benefit only pays if the fall arrives early. That is insurance, and insurance loses money on average.
Should I just hold more cash then?
Usually not, and the page will show you why. Move $120,000 of the bond bucket into cash — $240,000 cash, $210,000 bonds — and the buffer does not move at all: still 8.4 years, because it is cash and bonds together that fund it. What changes is the cost. The drag on a smooth path rises from $38,528 to $94,014, and the ending balance through the fall FALLS from $153,230 to $131,737. Deepening the buffer means adding to cash and bonds together, not shuffling between them.
What does the equity bucket have to earn to keep refilling the others?
Your spending divided by the equity bucket. On the default run that is $48,000 out of $750,000, or 6.40% a year — comfortable against an assumed 8%, with room to spare. This is a far better test of an allocation than any percentage: a portfolio whose growth sleeve cannot cover its own refill is one that shrinks its buffer every year, and it stops being the portfolio you designed. It is also the reason the refill rule here harvests only the equity bucket's GAIN for the year rather than selling equities down to a nominal target, which would strip the growth sleeve bare in exactly the falling market the strategy exists to sit out.
Which accounts should the buckets live in?
That is the largest thing this page does not model and it can matter as much as the sizes. Cash held inside a traditional IRA is ordinary income when it comes out; the same cash in a brokerage account is barely taxed. Equities held in a taxable account get long-term gains rates and a step-up at death; held in an IRA they come out as ordinary income. And from 73 a required minimum distribution takes money out whether the buckets wanted it to or not, usually from the wrong sleeve. There is also one deterministic path here, no dividends or interest paid out separately, and no tax anywhere.