During the wealth accumulation phase, market volatility is easily mitigated by regular contributions and time. In contrast, during the decumulation phase, liquidating depressed assets to fund lifestyle expenditures inflicts permanent capital impairment.
The Multi-Bucket Liquidity Strategy
To insulate retirees against sequence-of-returns risk, we implement a multi-bucket architecture:
- Bucket 1 (Immediate Liquidity): 1-2 years of living expenses in secure, short-term reserves.
- Bucket 2 (Capital Continuity): 3-7 years in high-quality fixed income and dividend-producing assets.
- Bucket 3 (Long-Term Growth): Equity and real assets designed to outpace inflation across a 30-year horizon.
This structure ensures retirees never need to sell growth assets during market corrections.
