Do you worry about running out of money in retirement? How do you draw down your assets without tanking your portfolio? Eric + Jason talk with FIRE bloggers Karsten Jeske and Fritz Gilbert about the bucket strategy. Is it a reasonable withdrawal plan or nothing more than a gimmick? They discuss alternative approaches, how to generate a retirement paycheck, and the role of cash. Whether you’re interested in FIRE or on a traditional retirement path, you can’t afford to miss this episode!
Show notes may be found below the video
The 2023 bucket strategy showdown began with these two blog posts by Fritz and Karsten: “Is The Bucket Strategy a Cheap Gimmick?” (Retirement Manifesto), and “Discussing FIRE Bucket Strategies with Fritz Gilbert” (Early Retirement Now). These articles provide essential background to the debate about the utility and validity of the bucket strategy!
- Did you see our 2021 interview with Fritz ? If not, you’ll definitely want to check out “Retirement Is Nothing Like I Thought It Would Be“. It’s one of our most popular episodes to date for good reason!
- In 2022 we spoke with Karsten for the first time. We covered a lot of ground in this episode about safe withdrawal strategies – so much so that we also released a follow-up video called “Karsten Spoke, We Listened. Here’s What We Learned”.
- Would you like to meet Karsten and Fritz? If you didn’t stick around until the end of the video, you might have missed Fritz’ comment about them attending FI Chautauqua in Ecuador this year. Get all the details here on this conference and how you can attend.
Fritz Gilbert’s Content
- How To Build A Retirement Paycheck is the first of (currently) four great posts on Fritz’ implementation of the bucket strategy, which we discussed at length in this episode and also in prior videos. The other articles in the series are linked here too, including one he mentioned in this episode, “How to Build a Bond Ladder”.
- A Strategy For Buying Into A Bear Market is a post which shares what Fritz learned from the 2008 financial crisis and how he’s managing today’s market volatility.
- In this episode, Fritz mentioned his post “A Step-By-Step Guide for Your Annual Financial Update”. Within you’ll find his guide to an annual review, including a checklist he developed along with links to spreadsheets to help you implement your own process.
- In 2021, Fritz recently wrote a book called “Keys to a Successful Retirement” which captures the many lessons he has learned on his retirement journey so far. This is a great read for all current and future retirees. It goes far beyond the financial, and leans heavily into the social and emotional aspects of retirement, just like his blog. Highly recommended!
- Freedom for Fido is the charity that the Gilberts started, whose stated purpose is to:
“Free the dogs who live on chains in the North Georgia Mountains. We are a charity which provides free fencing and dog houses for low-income residents of the Blue Ridge area.” To learn more about this passion project, be sure to check out this link,
Karsten Jeske’s Content
- Safe Withdrawal Rate series: This is the landing page for the 56-part SWR series (now; it will surely continue to grow) for which Karsten is best known. Be sure to start with the guidance he provides on how to navigate this great but expansive content. Many essential topics are covered and not all of them involve deep dives into math!
- Has Karsten written about the bucket strategy before? Yep! In 2021 he posted Part 48 in the SWR series, “Retirement Bucket Strategies: Cheap Gimmick or the Solution to Sequence Risk? “. Be sure to check it out for all the details, including the financial modeling he referenced in today’s episode.
- Portfolio rebalancing is an essential part of both strategies discussed in today’s video. This key topic is addressed in Part 39 of the SWR series. Rebalancing isn’t a panacea for sequence risk, but it’s certainly an important element to consider. As we’ve discussed previously, being consistent + avoiding market timing is essential.
- A topic we didn’t hit on today but have talked about extensively in the past is Karsten’s Safe Withdrawal Rate Toolbox. We will be talking more about this powerful, free downloadable tool very soon. In the meantime, Part 28 is the post where the revisions to the original calculator are described and the latest tool is linked. To see the history of this tool, you’ll need to go back to Part 7 of the series.
- You may have Karsten mention that Jason is using his CAPE-Adjusted Safe Withdrawal Rate strategy. Big ERN recently wrote several blog posts concerning a new “better” CAPE ratio. This article introduces the concept, while the next: “The 4% Rule Works Again! An Update on Dynamic Withdrawal Rates based on the Shiller CAPE – SWR Series Part 54” dives into details on how his SWR Toolbox can use this factor to model withdrawal rate in retirement. More on this topic soon!
Others Weigh In
- Unsurprisingly, the always active Bogleheads forum got in on the action with this lengthy comment thread about the bucket strategy debate. If you want a broad range of opinions from many different viewpoints, look no further than this post, Just be prepared to deep dive for hours if you do!
- Popular YouTuber and author Rob Berger also weighed in back in 2021 with this video on the bucket strategy. In it, you’ll learn why he thinks this plan is flawed and advocates you should take a different path.
- As mentioned in this episode, financial advisor and blogger Michael Kitces has also written plenty on this topic. Two relevant posts are “Are Retirement “Bucket” Strategies An Asset Allocation Mirage?” and also “Managing Sequence Of Return Risk With Bucket Strategies Vs A Total Return Rebalancing Approach”. These are both excellent articles and serve as a good expansion of the discussion we had with Fritz and Karsten.
Slides from this video:
You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.
- Eric’s business: 30X40 Design Workshop
- Eric’s YouTube Channel
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