Cascading expenses are an important feature of the bucket approach to retirement planning. They reflect the reality that retirees often reduce spending when markets decline.

Under cascading coverage, the first few years of expenses are fully covered to ensure financial stability. The following years may be covered at a lower level, such as 80%, while later years may be covered only 50%. This structure mirrors how retirees typically adjust discretionary expenses during market downturns.

By gradually reducing the level of coverage over time, cascading coverage presents a more realistic spending path and reduces the burden placed on the safety bucket while still maintaining overall financial security.