The 3/21 Retirement Plan: Buckets, Down Markets, and Avoiding Sequence of Returns Risk

Freddie Bell interviews Leibel Sternbach of Yields4You about the 3/21 retirement plan and how retirees can pay bills without selling investments during down markets. Sternbach explains “3” as three time-horizon buckets: a short-term near-cash bucket designed to limit losses to about 5%, a second bucket covering another few years with a targeted maximum drawdown around 10%, and a third growth bucket aimed at higher returns, with the first two shielding it from forced selling. He discusses sequence of returns risk, historical drawdowns and recovery periods, and why retirees must know which dollars they’ll sell for income. “2” refers to using two strategies per bucket for layered protection, and “1” is reviewing and stress-testing the plan annually as taxes, markets, and rates change. He also notes examples for the “now” bucket such as CDs, money markets, short-term Treasuries, and short-term corporate debt, and discusses considerations around rising rates and opportunities during market lows.