One tricky question in retirement planning: should you use a 2-bucket model or a 3-bucket model?

Both sound reasonable. Both are widely used. But the choice isn’t obvious.

The real issue is this: in a 2-bucket model, the growth bucket has to do two jobs—refill your safety bucket and build long-term wealth. Refill requires reliability, while building a legacy needs patience and risk. The result is often a lower return portfolio.

A 3-bucket model separates these roles. The intermediate bucket handles refilling, while a third, higher-risk (growth) bucket compounds without interruption.

So, to simplify the choice, use the following test: If you want a legacy, use 3 buckets. If you don’t, 2 buckets are enough.