Written on November 3, 2009
You may not have noticed, but over the summer a “Buckets” war broke out in the retirement income business. It seems that everyone has discovered “Buckets,” a reference to time-segmented asset allocation or “laddered” income-generation strategies.
In June of this year the non-profit National Endowment for Financial Education (NEFE) launched a retirement income-focused website called Decumulation.org. The website highlights a strategy to, “to split your money into three buckets. Each “bucket” covers a certain period of years and holds different types of investments, depending on the time period covered.”
In July, both Russell Investments and Nationwide unveiled their versions of “Buckets.” Russell based it’s version on a four-Bucket strategy, naming them the “Endowment Bucket,” the “Kids’ and Bequest Bucket,” the “Lifestyle Bucket” and the “Essentials Bucket.”
Not to be outdone, Nationwide’s program, known as RetireSense, is based upon five, five year “Buckets” that Nationwide has called “Life Segments.” With it’s program it appears that Nationwide has copied Wealth2k’s program, The Income for Life Model. “Buckets” of five-years’ duration not to mention expropriating the “Segment” nomenclature seems like a copy to me. Where did Nationwide get these ideas?
In August, a group called Sequent introduced a program called “Better Buckets” that is based upon a three-Bucket design. I suspect that Raymond Lucia, CFP, author of the book entitled Buckets of Money may object to all this “Bucketizing!” He owns a trademark on the term buckets.
Having been “on the street” with a laddered income generation strategy (The Income for Life Model) since 2003,I’m thrilled that so many others have joined the party. It’s a positive development. Time-segmentation offers very real economic advantages as well as psychological and behavioral benefits that are just as important. Look no further than the experiences over the course of the market breakdown of advisors who had recommended The Income for Life Model. They and their clients are in much better shape than most. I’ve “lived the difference” with these advisors. It’s quite real.
So we have a bevy of “Buckets” but do we have a winning strategy? Maybe. Wealth2k’s focus is not to force a predetermined number of “Buckets” on an investor. Rather it is to craft n income-generation plan that utilizes precisely the number of “Buckets” that best meets the investor’s needs. Doesn’t that make more sense? Moreover, the Wealth2k approach begins with assessing the investor’s need for guaranteed retirement income and then proceeds to “build a floor” of guaranteed retirement income undet the time-segmented strategy.
More and more people are learnng about outcome-focused retirement income investing strategies including time-segmentation. You may enjoy visiting the first website Wealth2k has built for investors. It’s IFLMMovie.com. I would appreciate your thoughts about it.