Glossary
What is time segmentation?
Time segmentation is a retirement income approach that divides savings into consecutive time periods — often five-year segments — and invests each one according to when it will be spent. Near-term segments are held in stable assets, later segments in growth assets, because they have decades before they are needed.
It is sometimes called a bucket strategy. The idea is that the money paying you next year and the money paying you in twenty-five years have completely different jobs, so treating them as one portfolio with one allocation is a compromise that serves neither.
As each segment is spent down, the next has been growing to take its place. Refilling happens deliberately, often in good years, rather than automatically at whatever price the market happens to offer.
It does not remove market risk or guarantee an outcome. What it does is change when you are forced to sell, and in retirement that matters a great deal.
Common questions
Commonly four to six, covering twenty to thirty years. The right number depends on your horizon and how much of your income is already covered by steady sources like Social Security or a pension.
Research is genuinely mixed on which produces more money. What segmenting reliably does is make the plan easier to hold on to in a downturn, because you can see that next year's income is already set aside. Behavior matters more than optimization.
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