An interesting exchange of thoughts, Bob, Kevin, Randy:
Like you Bob, I too typically would set an expectation for an individual equity before I bought it. (I say "would" in the past tense as I am presently on a journey to reduce my individual equity holdings to 5 or less as I add to my various index holdings). This resulted in a combination of short term holds to multi decade holds, some of which remain today.
With the exception of Berkshire Hathaway, which until now I just included in my Total Market Index % allocation for years as a perennial buy and hold "pseudo" broad index in itself; I made and still make it a point to "take the cream off the top" when an equity exceeds my expectations. These days, I reinvest the "cream" into the various broad indexes I hold in my annual rebalance exercise.
A good case study for "scraping the cream off" vs perennial hold of a good performing stock was GE. I started accumulating GE stock during the halcyon days of the late 80's and 90's. I lost count of the stock splits over those years as it went up....until it didn't starting around 2000. By "scraping the cream" off on at least two occasions during the period preceding 2000 it was a huge help in the downpayment for the first two houses we bought. GE stock met the primary goal I set for it at the time. It was a good example of "let your horses run but corral some of the profits".
We still hold some of the remaining GE stock to this day. Any other stock that performed as it did after 2000 would have been sold off entirely long ago. GE however was the first stock I ever bought as a newly minted GE employee at the time. It had/still has a little emotional connection. Oddly enough that old GE horse has come back from the pasture and gotten back on the race track in its own right combined its offspring, GEV running ahead of it. I see another round of "scraping of the cream" in the not too distant future after a quarter century of dormancy.
Meanwhile I too am probably going to say good bye to Berkshire Hathaway after multiple decades of accumulation and holding. Berkshire met its purpose/completed its mission and while well done, time to go. I have no emotional connection to it, never have. It will just be ruthlessly indexed soon in my portfolio.
75% is a "C" grade where I went to school. I'd hate to be dependent on a retirement program with that grade.
For those who, with limited resources can't develop their own DIY plans, or for those who choose to not invest the time to develop plans; I support the full spectrum of options including annuities as I state above. Again self determination.
My point is that annuitization of 401Ks (partial or otherwise) should not be mandated for those who have the means and willingness to develop their own income streams for retirement simply because another segment of the population is best served by that option. Meanwhile, there is plenty of pie being eaten by retired DIYers (including on this forum to an above average degree from what evidence I have seen) because they have chosen to let the sky be their limit.
Finally, we are in agreement that the 401K is the better retirement vehicle.
I'm glad there are annuities out there and that options for incorporating them into 401Ks are possibly on the horizon for those who want the assurance of a known level or trajectory of income. The more options and self determination the better. All is good as long as it is never mandated that a worker has to allocate a % to an annuity. Somehow I could see some legislators leaning that way.
As long as the 100% DIY options (which I vastly prefer) remain intact. All is good. Again, options and self determination. Now let's find an exit ramp for mandated income stream for all from the broken Social Security morass. Reset it for the next generations to being truly "insurance" for those who need it vs the current income "assurance" for all. Meanwhile, keep the promise to those who have paid a huge opportunity cost to pay into S.S. for "assurance" thus far....or.... at least some of the promise after 2032.
Mark, Thanks for writing this.
I have been using the 5% portion of the rule but had not arrived at the 25% rule for the smaller allocations. I like it! I am going to adjust my spreadsheet formulas accordingly! Very helpful as I have struggled a bit on when to rebalance the the lower allocation elements of the portfolio.
In general I am with you. Make as few and for me infrequent (once, maybe twice per year adjustments). Now I will just let the spreadsheet tell me when the smaller allocations get adjusted without even having to think further on it.
Another nugget collected on the journey to an autopilot portfolio.
Well done and best regards.
A well written and thought provoking article Jim.
Let's hope that pendulum stays somewhat toward the center over time in the manner you describe in the U.S. It feels like we may have to swing into at least the edge of the extreme(s) before we (re)find that center.....hopefully again. "Everything in moderation; too much of anything in life is not a good for you" are words I learned from my father at a young age. He lived a very long and happy life.
So true that the states need to get their money from somewhere. That said, I'll take my higher Texas property taxes any day over the nearly 10% income tax I was paying in the extremely poorly run state we left over 10 years ago. That state also has a similar sales tax to Texas on top of that. Tipping (which is generally getting out of hand everywhere) is no different based on visits back to the poorly run state. The lower annual car registration tab fee in Texas vs the poorly run state is also a bonus.
I am glad (albeit a bit surprised) that you have faith in an informed electorate.
I am less optimistic in this regard. In my view, humans are driven by incentives. The incentives for the Congress (and at the corresponding state and city levels without term limits) are skewed away from making the often unpopular choices that have the long term interests of the country (state, city) at the forefront of their mind. Far too much energy is directed at getting re-elected and remaining in the role as a "career" vs actually doing the work. If for example there were two terms allowed; the second term in particular would be devoid of re-election distractions. There would be incentive to actually get something done in a limited remaining time before returning to the general population...a population that would still be relatively familiar after only a few years away.
Oh and by the way, maybe with term limits the spectre of eliminating Congressional pensions would be considered....you know lead by example....so that eventually for the good of the country all Federal Employees would join the vast majority of those they "serve" in relying on 401K or 401K -like retirement plans.
Two pre-requisite words regarding Congress (which has EVERYTHING to do with this tiresome topic): "Term Limits". Only then will subjectivity and creativity have a fighting chance on such a "risky" topic for elected officials.
Meanwhile, sad to say, any commentary or hopeful letter writing on the S.S. topic is like screaming into a tornado and expecting to be heard.
RDQ for Congress?
General commentary on the Bucket Strategy as well as hopefully a helpful response to "tip sophomore comment and questions below. While clearly there are numerous variations to the "Bucket Strategy" it need not be complicated or time consuming nor are there set rules as some seem to think there are.
It is merely a construct that for some, organizes the thought process on how to invest various portions of an overall retirement portfolio.
I find the compartmentalization of the buckets to be helpful and allows me to be more aggressive with the "Bucket #3" funds which by design are not to be used for over 10 years thanks to buckets #1 and #2. To be fair, I did spend quite a bit of time designing and "test flying" my Bucket Strategy over at least a 10 year period prior to retirement.
The goal was to generate inflation adjusted income (assumption of 3% annual inflation) into perpetuity.
During pre retirement my salary/other income stood in as Bucket #1 while I filled up/overfilled Buckets #2 and #3.
It also gave me a very clear "glide path" into retirement. I could easily tell when My buckets "runeth over" and opted to work a bit longer anyway for good measure adding to bucket #3. Upon retirement, I filled up Bucket #1 (two years income) with a severance payment and some excess funds in Bucket #2.
Thereafter for the last 6 years I only look at and rebalance my buckets once per year (twice max). This takes about an hour right after tax time. Some key points and counter to some of the assumptions and myopia in the case of the author of the Forbes article linked by "tipsophomore" :
a) One does indeed rebalance equity and bonds etc. in a bucket strategy. Most of the rebalancing is WITHIN bucket #3 in particular and in my case within bucket #2 as well as I have a conservative equity component within my mid term bucket. Rebalancing the various bond funds is sometimes needed as well. Again, this is a once or twice a year exercise.
b) In my design I do not move assets from bucket #2 to #3. That's unnecessary complexity. Bucket #2 is just designed to keep pace with inflation or better and to top-off bucket #1 once a year after I withdraw my inflation adjusted annual "salary". Bucket #3 is designed to exceed inflation and grow long term (10 or 11 years out thanks to bucket #1 plus bucket #2 from any point in time). If there is a down year in bucket #3, I rebalance from the smaller bond allocation percentage WITHIN bucket #3.
c) There is no requirement to refill bucket #2 from bucket #3 in down year(s) ....unless we have a very long string of down years.
That's a key attribute of the Bucket Strategy. Bucket #2 is the key time "buffer" between buckets #1 and #3 which empowers a more aggressive investment allocation in Bucket #3.
There would probably be less hesitation to pay higher taxes in the U.S. if there was even a modicum of confidence that the dollars would be used with even some minor degree of efficiency and competence. The decline in these attributes is decades long and continuing down. Same goes for many of the individual state and city governments who embody the same malaise with the added aspect of being able to waste not only state generated revenue but federal dollars as well. Let's see some progress on this first...........meanwhile the avoidance of taxes to the degree legally possible and willingness to "vote with our feet" and at least move between states (if not the next step) is a growing focus for many.
Comments
An interesting exchange of thoughts, Bob, Kevin, Randy: Like you Bob, I too typically would set an expectation for an individual equity before I bought it. (I say "would" in the past tense as I am presently on a journey to reduce my individual equity holdings to 5 or less as I add to my various index holdings). This resulted in a combination of short term holds to multi decade holds, some of which remain today. With the exception of Berkshire Hathaway, which until now I just included in my Total Market Index % allocation for years as a perennial buy and hold "pseudo" broad index in itself; I made and still make it a point to "take the cream off the top" when an equity exceeds my expectations. These days, I reinvest the "cream" into the various broad indexes I hold in my annual rebalance exercise. A good case study for "scraping the cream off" vs perennial hold of a good performing stock was GE. I started accumulating GE stock during the halcyon days of the late 80's and 90's. I lost count of the stock splits over those years as it went up....until it didn't starting around 2000. By "scraping the cream" off on at least two occasions during the period preceding 2000 it was a huge help in the downpayment for the first two houses we bought. GE stock met the primary goal I set for it at the time. It was a good example of "let your horses run but corral some of the profits". We still hold some of the remaining GE stock to this day. Any other stock that performed as it did after 2000 would have been sold off entirely long ago. GE however was the first stock I ever bought as a newly minted GE employee at the time. It had/still has a little emotional connection. Oddly enough that old GE horse has come back from the pasture and gotten back on the race track in its own right combined its offspring, GEV running ahead of it. I see another round of "scraping of the cream" in the not too distant future after a quarter century of dormancy. Meanwhile I too am probably going to say good bye to Berkshire Hathaway after multiple decades of accumulation and holding. Berkshire met its purpose/completed its mission and while well done, time to go. I have no emotional connection to it, never have. It will just be ruthlessly indexed soon in my portfolio.
Post: When to Leave Your Portfolio Alone
Link to comment from June 29, 2026
75% is a "C" grade where I went to school. I'd hate to be dependent on a retirement program with that grade. For those who, with limited resources can't develop their own DIY plans, or for those who choose to not invest the time to develop plans; I support the full spectrum of options including annuities as I state above. Again self determination. My point is that annuitization of 401Ks (partial or otherwise) should not be mandated for those who have the means and willingness to develop their own income streams for retirement simply because another segment of the population is best served by that option. Meanwhile, there is plenty of pie being eaten by retired DIYers (including on this forum to an above average degree from what evidence I have seen) because they have chosen to let the sky be their limit. Finally, we are in agreement that the 401K is the better retirement vehicle.
Post: Automatic Income stream? How important to you?
Link to comment from June 27, 2026
I'm glad there are annuities out there and that options for incorporating them into 401Ks are possibly on the horizon for those who want the assurance of a known level or trajectory of income. The more options and self determination the better. All is good as long as it is never mandated that a worker has to allocate a % to an annuity. Somehow I could see some legislators leaning that way. As long as the 100% DIY options (which I vastly prefer) remain intact. All is good. Again, options and self determination. Now let's find an exit ramp for mandated income stream for all from the broken Social Security morass. Reset it for the next generations to being truly "insurance" for those who need it vs the current income "assurance" for all. Meanwhile, keep the promise to those who have paid a huge opportunity cost to pay into S.S. for "assurance" thus far....or.... at least some of the promise after 2032.
Post: Automatic Income stream? How important to you?
Link to comment from June 26, 2026
Mark, Thanks for writing this. I have been using the 5% portion of the rule but had not arrived at the 25% rule for the smaller allocations. I like it! I am going to adjust my spreadsheet formulas accordingly! Very helpful as I have struggled a bit on when to rebalance the the lower allocation elements of the portfolio. In general I am with you. Make as few and for me infrequent (once, maybe twice per year adjustments). Now I will just let the spreadsheet tell me when the smaller allocations get adjusted without even having to think further on it. Another nugget collected on the journey to an autopilot portfolio. Well done and best regards.
Post: When to Leave Your Portfolio Alone
Link to comment from June 26, 2026
A well written and thought provoking article Jim. Let's hope that pendulum stays somewhat toward the center over time in the manner you describe in the U.S. It feels like we may have to swing into at least the edge of the extreme(s) before we (re)find that center.....hopefully again. "Everything in moderation; too much of anything in life is not a good for you" are words I learned from my father at a young age. He lived a very long and happy life.
Post: The S Word
Link to comment from June 23, 2026
So true that the states need to get their money from somewhere. That said, I'll take my higher Texas property taxes any day over the nearly 10% income tax I was paying in the extremely poorly run state we left over 10 years ago. That state also has a similar sales tax to Texas on top of that. Tipping (which is generally getting out of hand everywhere) is no different based on visits back to the poorly run state. The lower annual car registration tab fee in Texas vs the poorly run state is also a bonus.
Post: …..taxes and you
Link to comment from June 19, 2026
I am glad (albeit a bit surprised) that you have faith in an informed electorate. I am less optimistic in this regard. In my view, humans are driven by incentives. The incentives for the Congress (and at the corresponding state and city levels without term limits) are skewed away from making the often unpopular choices that have the long term interests of the country (state, city) at the forefront of their mind. Far too much energy is directed at getting re-elected and remaining in the role as a "career" vs actually doing the work. If for example there were two terms allowed; the second term in particular would be devoid of re-election distractions. There would be incentive to actually get something done in a limited remaining time before returning to the general population...a population that would still be relatively familiar after only a few years away. Oh and by the way, maybe with term limits the spectre of eliminating Congressional pensions would be considered....you know lead by example....so that eventually for the good of the country all Federal Employees would join the vast majority of those they "serve" in relying on 401K or 401K -like retirement plans.
Post: Many seniors think we paid for our Social Security benefits based on the FICA taxes we paid. Let’s dispel that myth- we didn’t
Link to comment from June 19, 2026
Two pre-requisite words regarding Congress (which has EVERYTHING to do with this tiresome topic): "Term Limits". Only then will subjectivity and creativity have a fighting chance on such a "risky" topic for elected officials. Meanwhile, sad to say, any commentary or hopeful letter writing on the S.S. topic is like screaming into a tornado and expecting to be heard. RDQ for Congress?
Post: Many seniors think we paid for our Social Security benefits based on the FICA taxes we paid. Let’s dispel that myth- we didn’t
Link to comment from June 16, 2026
General commentary on the Bucket Strategy as well as hopefully a helpful response to "tip sophomore comment and questions below. While clearly there are numerous variations to the "Bucket Strategy" it need not be complicated or time consuming nor are there set rules as some seem to think there are. It is merely a construct that for some, organizes the thought process on how to invest various portions of an overall retirement portfolio. I find the compartmentalization of the buckets to be helpful and allows me to be more aggressive with the "Bucket #3" funds which by design are not to be used for over 10 years thanks to buckets #1 and #2. To be fair, I did spend quite a bit of time designing and "test flying" my Bucket Strategy over at least a 10 year period prior to retirement. The goal was to generate inflation adjusted income (assumption of 3% annual inflation) into perpetuity. During pre retirement my salary/other income stood in as Bucket #1 while I filled up/overfilled Buckets #2 and #3. It also gave me a very clear "glide path" into retirement. I could easily tell when My buckets "runeth over" and opted to work a bit longer anyway for good measure adding to bucket #3. Upon retirement, I filled up Bucket #1 (two years income) with a severance payment and some excess funds in Bucket #2. Thereafter for the last 6 years I only look at and rebalance my buckets once per year (twice max). This takes about an hour right after tax time. Some key points and counter to some of the assumptions and myopia in the case of the author of the Forbes article linked by "tipsophomore" : a) One does indeed rebalance equity and bonds etc. in a bucket strategy. Most of the rebalancing is WITHIN bucket #3 in particular and in my case within bucket #2 as well as I have a conservative equity component within my mid term bucket. Rebalancing the various bond funds is sometimes needed as well. Again, this is a once or twice a year exercise. b) In my design I do not move assets from bucket #2 to #3. That's unnecessary complexity. Bucket #2 is just designed to keep pace with inflation or better and to top-off bucket #1 once a year after I withdraw my inflation adjusted annual "salary". Bucket #3 is designed to exceed inflation and grow long term (10 or 11 years out thanks to bucket #1 plus bucket #2 from any point in time). If there is a down year in bucket #3, I rebalance from the smaller bond allocation percentage WITHIN bucket #3. c) There is no requirement to refill bucket #2 from bucket #3 in down year(s) ....unless we have a very long string of down years. That's a key attribute of the Bucket Strategy. Bucket #2 is the key time "buffer" between buckets #1 and #3 which empowers a more aggressive investment allocation in Bucket #3.
Post: Bucket Strategy
Link to comment from June 9, 2026
There would probably be less hesitation to pay higher taxes in the U.S. if there was even a modicum of confidence that the dollars would be used with even some minor degree of efficiency and competence. The decline in these attributes is decades long and continuing down. Same goes for many of the individual state and city governments who embody the same malaise with the added aspect of being able to waste not only state generated revenue but federal dollars as well. Let's see some progress on this first...........meanwhile the avoidance of taxes to the degree legally possible and willingness to "vote with our feet" and at least move between states (if not the next step) is a growing focus for many.
Post: Billionaires, taxes and you
Link to comment from May 30, 2026