In our last blog post, we spoke about the concept of bucketing investments and the usefulness of it. Today, we will look at one of the few effective customised strategies that can work for investment needs that come with retired life and are a good way to undertake retirement planning:
The post retirement buckets: You have hung up your boots professionally and have a sizeable retirement fund.

You can divide this in the following ways to have an efficiently allocated portfolio:

• Immediate expenses bucket: Expenses worth the next 3 years, adjusted to inflation, to be parked in a liquid mutual fund, ultra-short-term mutual fund, sweep-out FD, or similar low -risk-low-return assets. Simply withdraw the monthly required amount till this bucket gets exhausted.
• Medium-term bucket: Keep the next 3 years’ worth of expenses in a bucket consisting of hybrid or conservative hybrid mutual funds. A few corporate bond funds may also be added in a favourable situation. The objective of this bucket is to earn moderate returns that beat inflation and have low risk exposure. Once the immediate expenses bucket is exhausted, this bucket balance can be moved to the immediate expense bucket for the next set of 3 years.
• Long Term Bucket: The remaining amount can be invested in a diverse portfolio comprising of Indian equity funds, international mutual funds, gold exposure(using mutual funds) , etc. This bucket will have a longer time period for growth and will accelerate the portfolio returns. Money can be withdrawn from time to time from this bucket to replenish the medium-term bucket.

Thus, by dividing the total amount based on the need for the money, a stable, safe and growth-oriented portfolio can be built.

Retirees may also decide to create different buckets for:

• Medical emergency fund
• Any gifting obligations,
• Vacations and hobbies, etc.

The idea is to link investment instruments to needs that match the risk taken and return expected so that you neither settle for lower returns, nor excessive risk.
Bonus tip: The above portfolio can be complemented very well with products like PPF, Sovereign Gold Bonds, Corporate FDs, Corporate Bonds, etc. to make the portfolio more diverse.