Bucketing can be an effective diversification tool. Many retirees feel uneasy relying on stocks as the primary source for refilling the cash bucket. For them, introducing a separate gold or commodities bucket offers a practical way to diversify equity exposure.

This bucket can be designed to hold enough for three years of refills of the safety (cash) bucket, serving as a source for refilling the cash bucket. During this period, if stocks are down or inflation is elevated, the gold bucket can be used to refill the cash bucket instead of selling equities at unfavorable prices.

This not only strengthens diversification but also creates a clear and reliable funding pathway. More importantly, bucketing helps determine the appropriate allocation to gold, which is far less intuitive under a fixed asset allocation framework.