Retirement investing means funding near-term withdrawals while keeping some money invested for later years. Age-based rules and a three-bucket approach can help you plan, but neither guarantees a result.
Fidelity's September 24, 2026 retirement-income guidance says a plan should balance growth and income. The right allocation depends on a person's goals, risk tolerance, health and how long the money may need to last.
Retirement changes the job of investing. A portfolio still has to support withdrawals and preserve purchasing power, but it also has to limit the risk of taking on too much market exposure. A single formula cannot settle the question. The plan needs to connect investments to when the money may be needed.
Chase distinguishes asset allocation-the mix of stocks, bonds, cash and alternatives-from diversification, which spreads risk within and across those asset classes.
Allocation is a starting point
One common rule of thumb subtracts an investor's age from 100 to estimate the share of a portfolio held in stocks. Other versions use 110 or 120. Under the 120 approach, a 65-year-old would hold 55% in stocks and 45% in bonds and cash. That is an example, not a universal recommendation.
The idea is to reduce exposure to investments that can swing in value as retirement approaches, while keeping some stock exposure for potential long-term growth. But the arithmetic leaves out personal circumstances. Two people of the same age may have different withdrawal needs, goals, health considerations and tolerance for losses. The rule can start a conversation about risk. It has limits.
A larger stock allocation does not automatically improve someone's chances of meeting every retirement goal. Stocks offer growth potential, but their value can move sharply. Bonds and cash can serve different roles. The allocation still has to fit the investor's expected spending timeline and ability to withstand market changes.
JPMorgan Asset Management has also discussed combining passive stocks with selectively active fixed income in target-date and pre-retirement strategies. The approach aims to balance cost, risk and returns as retirement approaches, as described in its target-date strategy discussion.
Morningstar's baseline safe withdrawal estimate for new retirees is 3.9% with 30%-50% of the portfolio in stocks. The estimate is a benchmark for planning withdrawals, not a guarantee of future results.
Match money to timing
A bucket strategy groups assets by when the money may be needed. The near-term bucket holds cash, high-interest savings and short-term deposits for one to three years of withdrawals. If markets fall, that reserve can cover current spending and reduce the need to sell stocks at a discount to raise cash.
Morningstar's bucket approach commonly suggests keeping one to two years of future expenses in liquid or short-term assets. The right reserve depends on actual spending needs and any guaranteed income already available. Timing matters.
The medium-term bucket covers the next three to seven years. It may hold diversified fixed income, quality bonds and bond funds. The aim is to replenish the cash bucket, steady portfolio swings and earn modest returns. The Vanguard Total Bond Market ETF (BND) is one bond fund named in this approach. That does not make it suitable for every investor.
Money not expected to be needed for many years belongs in the long-term bucket. It can include U.S. and international equities, along with other holdings that have growth potential. A longer time horizon gives this bucket more room to absorb market swings. Losses are still possible.
For readers considering broad stock exposure in that long-term portion, a two-fund approach describes using U.S. and international stock ETFs instead of picking individual companies. It addresses diversification within equities. It does not determine how much of a retirement portfolio should be in stocks.
Keep the plan responsive
The buckets are not fixed silos. The strategy relies on replenishing near-term cash with medium-term assets over time. The long-term portion stays invested for later needs. The withdrawal schedule and the intended role of each holding matter as much as the initial allocation.
Goals, market conditions and health can change, so retirement plans may need to change too. A framework that seemed reasonable at the outset may need another look if expected withdrawals or personal circumstances shift.
Canadians withdrawing from RRSPs or RRIFs should also consider how withdrawals affect taxable income, the National Bank of Canada recommends. No allocation method can guarantee that money will last for life. A bucket structure cannot remove investment risk.
These approaches make the trade-offs easier to see. More cash can support near-term withdrawals. Keeping some money in equities preserves growth potential over a longer horizon. Bonds and cash are not interchangeable, and neither an age rule nor buckets can decide how much risk is acceptable. A plan built around that choice is more useful than a formula meant to fit everyone.
