Make Your Money Last a Lifetime

2. The bucket strategy. Here, you target your investments to pay off over different time periods.

For example, you might set up five buckets. Bucket 1, to be used up during your first five years of retirement, would contain cash, certificates of deposit or an annuity paying a monthly income for five years. Bucket 2, for years six to 10, might contain a short-term bond fund and some Treasuries.

Buckets 3 and 4, for years 11 to 15 and 16 to 20, could own intermediate bonds and bond funds or balanced stock-and-bond mutual funds. Bucket 5, for money you don't expect to need for more than 20 years, can be invested more aggressively in stocks. Every three years or so, replenish the near-term buckets with money from the next bucket up.

Michael Kitces, research director for the Pinnacle Advisory Group, says that bucketeers often wind up with the same balanced stock-and-bond allocation as the total return investors do.

3. The income floor strategy. Provide for your basic income needs by buying an annuity with lifetime payments that start at the date you expect to retire.

Or, at retirement, put part of your money into an immediate payout annuity, which will send you a monthly check. Invest the rest in stocks and bonds, withdrawing the money according to the 4 percent rule.

A 2010 study by Gallant Distribution Consulting Research in Sherborn, Mass., found that more than half of financial planners now prefer the bucket or income approach. "People feel comfortable with it," says planner John Sestina.

What if you realize that your money won't last? There are other options — working longer or returning to work, cashing in your house, adding an apartment over your kid's garage. As I said, you have to be a fox.

Jane Bryant Quinn is a personal finance expert and author of Making the Most of Your Money NOW. Her column, Financially Speaking, will appear monthly in the Bulletin and online.

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