The DoubleBucket® Method
Copyright © 2024

  4% Rule?  Does a 5% to 6% withdrawal rate sound a little better?

If so, please read on...

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The DoubleBucket Method is basically a hybrid of a bucket strategy and an asset allocation strategy.  It divides your retirement into time-frame buckets and fills each bucket with appropriate assets for each time-frame.   Then, those time buckets are merged together using time value of money to come up with an overall asset allocation.  This will generate what we call an "annuity table" that prescribes the asset allocations for each year of retirement, with the allocations becoming more conservative over time.  When withdrawals are taken, rebalancing is done according to the table. This isn't too different than a Target Date Mutual Fund offerend by Schwab, Vanguard, et. al..  However, with the DoubleBucket Method you have control over the money, you don't pay managment fees and it should return a better overall rate.

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Typically, financial planners will emphasize two points when developing a plan:  1) Guaranteed income, and 2) Preservation of capital.  That sounds reasonable, but you could also interpret that as "low withdrawal rates" and "money left on the table".  To get a guaranteed income, you need to sacrafice somewhere and that usually results in a low withdrawal rate.  In regards to the second point, preserving capital means you may die with a significant amount of money that could've been used during the active years of retirement.  With the DoubleBucket Method, we believe you can use that capital to boost your withdrawal rates, and still be confident that your non-discretionary spending will be covered.   The risk in using the DoubleBucket Method is that your income for discretionary spending may fluctuate from year to year.  However, we believe that (on average) the DoubleBucket Method will have a better withdrawal rate in comparison to most other strategies like the 4% Rule.  For more details on how all this works, please see our Research Paper (here),

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To get started, go to the Variable Annuity Calculator to see how to diversify your assets and determine your withdrawal rate.  If you want to do some experimentation with different time-bucket allocations, you can easily modify the defaults.  To  understand how the time-bucket allocations were derived, go to the Diversification Analysis page.  Links to both of these pages are at the top of this page in the menu bar.

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Enjoy!

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