How to Create a Retirement Income You Can Rely On

Article

16. 03. 2026.

How to Create a Retirement Income You Can Rely On

Michael Peart

Wealth Adviser

When it comes to retirement, one of the biggest concerns for most Australians is not only the markets themselves, but whether their money will last. Watching your super and/or investment balance rise and fall while drawing an income can create real anxiety, even for experienced investors.

That is where the bucket strategy comes in. It is a simple but effective way to manage your retirement income with structure, discipline and peace of mind.

Michael Peart

Wealth Adviser

What Is the Bucket Strategy

Bucket 1

Cash for Immediate Living Needs

The first bucket is the anchor of your plan. It provides the comfort of knowing that you have enough set aside for the next 12 months of living expenses, regardless of what the markets are doing.

This portion is typically held in cash or term deposits. If you receive regular income from outside your portfolio, such as rental payments, business interest dividends or a lifetime pension, you can subtract these from the amount you hold here.

How much cash to keep is a personal choice.

Conservative retirees might prefer to hold up to two years of expenses for extra peace of mind.
Growth-oriented investors may hold less, focusing instead on keeping more invested.

There is no perfect formula. The right amount depends on your lifestyle, temperament and comfort with market risk.

Bucket 2

Income and Stability

The second bucket sits between your short-term cash and long-term growth investments. Its role is to provide reliable income and a degree of stability.

Typically, this bucket covers around three to five years of living expenses and may include:

Investment-grade corporate bonds and hybrids
High-quality Australian shares that pay regular dividends and offer franking credits
A small allocation to high-yield securities

Income from this part of the portfolio is used to refill your cash bucket as you draw it down. This ensures you have liquidity without selling growth assets in volatile markets.

Bucket 2 acts as the stabiliser in your portfolio, delivers income, and earns a meaningful return to help offset inflation and maintain your purchasing power.

Bucket 3

Growth and Longevity

Managing the Buckets Over Time

Adapting to the Economic Climate

The Real Value of the Bucket Approach

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