Segmenting retirement assets by time horizon and purpose—often called "bucketing"—has become a cornerstone of modern income planning. As retirement researcher Wade Pfau notes, time segmentation offers both behavioral and financial benefits: it helps retirees plan in a way that mirrors how they think about money, while aligning investments to different stages of life.1 He also points out that while time segmentation is popular for its behavioral benefits, many advisors struggle with how to structure and replenish the income buckets consistently—something purpose-built tools can help automate.
And the approach is catching on. More investors are embracing this structure, whether formally through advisor-led income strategies or informally through separate pools for needs, wants, and wishes. The foundation of this strategy is the “needs” bucket: its role is to provide predictable income for essential spending like mortgage or rent, groceries, insurance premiums, and medical expenses, and it typically funds the first few years of retirement.
But its impact goes beyond covering expenses; it’s about creating a planning structure that aligns with how investors naturally think, feel, and act around money. As financial planner and researcher Michael Kitces points out, bucketed income strategies align with how retirees mentally organize their spending needs, from essentials to discretionary to aspirational.2 Designing the first bucket to reflect those essential needs isn't just intuitive—it also reinforces behavior that helps retirees follow through on their plan with greater clarity and less stress.
Foundational Needs Bucket: Qualitative and Quantitative Benefits
Where Current Tools Fall Short
Many retirees and advisors use familiar solutions to fill the first bucket, like money markets, certificates of deposit (“CDs”), or short-term bond funds. While these tools may offer liquidity or yield, few are designed to deliver steady, scheduled income aligned with actual spending needs.
Consider a hypothetical example: Steve allocates $100,000 to cover three years of essential retirement spending—his “needs bucket.” If he uses a money market or bond fund, he’ll need to manually sell about $2,777 per month to generate cash, and interest rates may fluctuate, so he doesn’t know exactly what his total income will be.
Bucketing has long helped investors manage retirement with clairty. What's changed is the availability of tools purpose-built to strengthen the strategy's foundation.
On the other hand, CDs offer fixed interest rates, but accessing principal before maturity can result in penalties. To get monthly liquidity, he’d need to create a multi-CD ladder, adding complexity.
In both cases, Steve gets monthly cash—along with some tedious monthly chores and guesswork.
Wouldn’t it be easier if a single investment could “sell itself” and send him the cash plus interest each month—with no guesswork or intervention required?
LifeX: A Purpose-Built Income Solution
LifeX ETFs are designed specifically to simplify bucketing strategies, offering predictable monthly payouts with the flexibility of an ETF.
Each ETF holds a ladder of U.S. Treasuries designed to lock in interest rates and to deliver predictable monthly cash flow over a defined horizon. The funds boost interest income by including tax-free return of principal—automating the spending plan without requiring rebalancing or sales.3
These ETFs aren’t just a way to simplify monthly cash flow—they can also serve a strategic role in broader planning.
Consider another hypothetical scenario: Matilda is a 64-year-old planning to retire next year. She’d like to delay Social Security until age 70 to increase her monthly benefit by over 35%—from approximately $3,600 to $5,100.4 To cover her spending in the meantime, she needs about $60,000 per year for five years.
With the LifeX 2030 ETF (BCKT), she can calculate exactly how many shares to buy: the fund intends to distribute $10 per share per year, so 6,000 shares are expected to provide $60,000 per year—paid as $5,000 per month over five years. No selling or tapping long-term investments required.
The result: a reliable cash flow plan for early retirement, uninterrupted investment in her long-term portfolio, and higher anticipated monthly Social Security benefits.
Bucketing has long helped investors manage retirement with clarity. What’s changed is the availability of tools purpose-built to strengthen the strategy’s foundation. Just as you don’t need to rebalance a stock portfolio manually—you can invest in a fund that does it for you—why should you settle for manually managing your distribution needs? LifeX Bucket ETFs are designed to help investors turn savings into cash flow with less maintenance and more precision—freeing the rest of the plan to invest for wants and wishes.
Footnotes
Aside from fluctuations based on changes in interest rates, the NAV of LifeX ETFs will decline over time as they distribute principal. Individual bonds carry an obligation to fully return principal to investors at maturity, however ETFs have no such obligation.
1. Pfau, Wade D. Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success. Retirement Researcher Media, 2021
2. Kitces, Michael. “Behavioral Biases and the Hierarchy of Retirement Needs.” 2/1/2017. https://www.kitces.com/blog/retirement-buckets-essential-discretionary-core-adaptive-bridge/
3. Each LifeX ETF intends to make distributions for which a portion of each distribution is expected and intended to constitute a non-taxable return of capital, which will reduce the amount of capital available for investment and may reduce a shareholder’s tax basis in his or her shares. Treasury interest income is subject to federal tax, and the sale of the ETFs could result in other taxable events. U.S. Treasury securities guarantee the payment of interest and return of principal when held to maturity, however, the LifeX ETFs provide no such guarantees.
4. Source: Social Security Administration (SSA). The maximum monthly Social Security benefit in 2025 is $5,108, available to individuals who (1) claim at age 70 (2) have earned at or above the maximum taxable earnings limit (e.g., $168,600 in 2024) for 35+ years. Claiming at age 65 instead of 70 reduces benefits by approximately 36% due to early claiming penalties and the absence of delayed retirement credits.
Risk Disclosures
The purpose of each LifeX Income Bucket ETF is to provide reliable monthly distributions consisting of income and principal through the end of a calendar year specified in the ETF’s prospectus.
Each Income Bucket ETF intends to make distributions for which a portion of each distribution is expected and intended to constitute a return of capital, which will reduce the amount of capital available for investment and may reduce a shareholder’s tax basis in his or her shares.
The LifeX Income Bucket ETFs invest in debt securities issued by the U.S. Treasury (“U.S. Government Bonds”) as well as money market funds that invest exclusively in U.S. Government Bonds or repurchase agreements collateralized by such securities. U.S. Government Bonds have not historically had credit-related defaults, but there can be no assurance that they will avoid default in the future.
Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. Legal advice can only be provided by legal counsel. Before deciding to proceed with any investment, investors should review all relevant investment considerations and consult with their own advisors.
Please see additional disclosures at the bottom of the page.
