3-Bucket Retirement Planner

The bucket strategy exists to solve one specific problem, and understanding that problem explains the whole design.

If equity markets fall sharply in the first years of your retirement and you are forced to sell units at depressed prices to fund living expenses, the corpus may never recover — even if markets rebound strongly afterwards. This is sequence-of-returns risk, and it is why two retirees with identical average returns can end up with completely different outcomes. Bucketing addresses it by keeping several years of expenses in assets that do not need to be sold at a bad moment.

The corpus is divided three ways. Bucket 1 holds liquid or ultra-short funds at around 5%, and funds the first slice of each year's withdrawal. Bucket 2 holds balanced advantage funds at around 11%, covering the medium term. Bucket 3 holds equity at around 15% and carries the long-term growth. Bucket 3's allocation fills whatever remains after the first two, so the three always total 100%.

Tax is handled the way a real redemption is taxed, and this is where the calculator departs from simpler tools. Every bucket grows at its pre-tax rate, and capital gains tax is charged only on the gain portion of what is actually sold, with the cost of the units tracked bucket by bucket. Buckets 1 and 2 sell a little every year to fund expenses, so they pay a little tax every year; bucket 3 is sold only at a rebalance, so its gains compound untaxed in between. Over a five-year interval that deferral is worth roughly 13.52% against 15% pre-tax, rather than the 13.13% an annual-tax assumption would give — the calculator shows that effective rate, and the blended real return built from it, for reference.

The corpus you need is not a single annuity formula. At each rebalance, buckets 1 and 2 are each sized to their own reserve target: the smaller of their share of the next block's expenses grossed up for tax, and the exact amount that fund needs to pay its share of every remaining withdrawal. Required corpus is the first block's reserve plus the present value, at the equity rate, of every later equity sale a fully funded plan would make. Fund exactly that amount and the simulation ends at zero in the year you reach your life expectancy; the dashboard also discounts it to today's money as the lump sum needed now.

The year-by-year projection then withdraws each year's expense first from buckets 1 and 2, lets the remainder grow, and at each rebalance sells only as much equity as the two reserve targets need — never more than bucket 3 holds. You can see every refill, every tax charge and the age at which the money runs out, rather than trusting a single output. Where a simple calculator gives you a number, this one gives you the mechanism.