The bucket approach isn’t just for managing market risk—it can also help retirees handle spending shocks. While unexpected expenses like emergency healthcare can’t be predicted, they can be buffered.

One effective structure is to use two safety buckets. The first covers regular living expenses for a few years, protecting against market downturns. The second is dedicated to healthcare shocks, with a clear two-year reserve set aside for major medical costs.

This separation reduces anxiety and avoids panic decisions during crises. Retirees know exactly where each expense will be funded from.

Other buffer assets—such as insurance cash value or reverse mortgages—can serve as alternatives. The goal isn’t to eliminate uncertainty, but to contain it within a simple, disciplined framework.