It clearly isn't a static AA as your AA isn't static. I have never heard of a pipeline but maybe that is a good name for this subset of bucket schemes. You have 2 buckets and a rule to move money from the risk bucket to the safe one. You would have to plot up how this scheme works in 1966 or 2000 but I have a feeling it works out to about the same as just holding 1.120m in the balanced fund. You lose a bit less during the drops but you also aren't buying as many shares at those reduced prices. It isn't going to make much of difference. Your AA isn't going to very a ton from a static 54/46 (60/40 would be the aggressive end after you deplete you cash buffer and it will take a really big bull market to get to like 50/50).DSBH wrote: ↑Wed Jan 25, 2023 5:38 pmThat would be a fair way to look at it. I am thinking of it as a - fixed 4% in number of shares - withdrawal strategy from a 60/40 portfolio into a living expense checking account with a balance large enough to “smooth out” variations in share prices, in either direction.dbr wrote: ↑Wed Jan 25, 2023 2:08 pmI think it is a "pipeline" strategy with a rule that tells you when to fill or draw the cash bucket and a rule for how much to draw from the stock bucket where the dollar amount varies with the share price …DSBH wrote: ↑Wed Jan 25, 2023 1:54 pm Fictitious numerical example: assume that I retired yesterday with this portfolio:
(1) 25,000 shares of XYZ Balanced Index Fund x $40/sh = 1,000,000 and
(2) $120,000 in cash/money market, so
my starting AA is roughly 53.6/46.4 for a portfolio totaling $1,120,000.
I need to withdraw a 40,000/yr to support my living expenses in addition to SS and pension, so I sell 250 shares of XYZ Balanced Index Fund 4 times a year around the 1040-ES deadline and pay my estimated taxes - for a total of 1,000 shares per year. If I get more than $40,0000 from the sale I put the extra in the cash/MM bucket, if I get less than $40,000 from the sale I withdraw from the cash/MM bucket.
Is this a "bucket strategy", or a "static AA", or anything else ?
The thing with all these bucket schemes is that they don't really hurt much in any case I have seen. So it is hard to say they are a bad idea. They just don't help much. The issue is that the problem with fixed AA isn't selling stocks at a loss. That just doesn't happen a whole lot in US history. The issue is that instead of doubling your money over 10 years (i.e. the average expectation), you break even. No bucket scheme can generate those missing returns...