Financial Calculators
Retirement Bucket Strategy Calculator
Money you need soon in cash. Money you need later in debt. Everything else in equity, where the time is.
Growth bucket (equity), years 11 onward
₹85,43,876
56.96% of the corpus
- Bucket 1: cash and liquid, years 1-3
- ₹19,10,160 (12.73%)
- Bucket 2: debt funds, years 4-10
- ₹45,45,964 (30.31%)
- Bucket 3: equity, the rest
- ₹85,43,876 (56.96%)
Bucket 1 holds the next few years' expenses in cash-like instruments so a market fall never forces a sale. Bucket 2 holds the following years in debt, discounted at its return. Everything else can stay in equity for a decade or more. Refill bucket 1 from bucket 2 yearly, and bucket 2 from 3 in good years.
These figures are for illustrative purposes only and are not investment advice. Please consult your investment adviser for investment related advice.
Three buckets, one corpus
The danger in retirement is not a market fall; it is being forced to sell equity during one to pay this month's bills. The bucket strategy removes that risk by structure. The first bucket holds a few years of expenses in cash and liquid funds. The second holds the following years in debt funds and deposits. The third, the remainder, stays in equity for a decade or more, which is long enough to ride out almost anything.
Each year, bucket one is refilled from bucket two, and bucket two from bucket three when markets are kind. This calculator sizes the three buckets from your corpus and expenses.
Size the near buckets, the rest is growth
Bucket 1 = sum of inflated expenses for years 1..A (held as cash)\nBucket 2 = sum of inflated expenses for years A+1..A+B, discounted at the debt return\nBucket 3 = corpus - bucket 1 - bucket 2Worked example: a corpus of Rs 1,50,00,000 against Rs 50,000 a month of expenses (after pension) inflating at 6%, with a 7% debt return: bucket 1 holds Rs 19,10,160 for years 1-3 (12.73%), bucket 2 holds Rs 45,45,964 for years 4-10 (30.31%), and Rs 85,43,876 (56.96%) stays in equity for year 11 onward.
Frequently asked questions
Why hold three years in cash earning almost nothing?
Because it is the price of never selling equity in a bad year. Three years covers most bear markets; the cost in lost return on that slice is small next to the cost of a forced sale.
What if the corpus does not cover the first two buckets?
The calculator says so. It means the corpus is too small for the expenses, and the fix is on the expense or pension side, or in a later retirement, not in a riskier allocation.
How is this different from a fixed 60/40 split?
It gets to a similar split by asking a better question: not what percentage feels right, but how many years of spending should be protected. The equity share then falls out of the answer.
What goes in each bucket?
Bucket 1: savings accounts, liquid and overnight funds, short FDs. Bucket 2: short and medium duration debt funds, FDs, SCSS and post office schemes. Bucket 3: diversified equity funds.
Structure beats forecasting.
We set up and maintain bucket portfolios for retirees, including the yearly refill, so income never depends on this year's market.