The goal of the MyBucketSystem was to set a target of withdrawing less than 5% from the portfolio on a yearly basis. Certified Financial Planning studies have shown that if a client withdraws less than 5% of the portfolio during retirement they have a high probability of not running out of money. The MyBucketSystem withdrawal rate is 4.8%.
Bucket 1- Short-Term Bonds and Bills & Cash.
Bucket 2- Mid-Term Bonds.
Bucket 3- Long-Term Bonds & Preferred Stock.
Bucket 4- Stocks & Equities
Bucket 1- Over the past 20 years, Short-Term Bonds and Bills have averaged 4.0% or more. We used 1.5% to be conservative.
Bucket 2- Over the past 20 years, Mid-Term Bonds have averaged 5.0% or more. We used 3%.
Bucket 3- Over the past 20 years, Long-Term Bonds have averaged 5.5% or more, but preferred stocks have averaged 7% or more. Therefore, we took a blended rate to come up with 5%.
Bucket 4- Stocks have averaged between 9.5%-10.5% since 1929 depending on the type of stocks(Large, Mid & Small). We wanted to be more conservative, so we used 8.5%. Our 8.5% includes the dividends from the stocks.
Projected 1.5% Return
Projected 3% Return
Projected 4% Return
Projected 8.5% Return
Year 16 Balance