3-Bucket Strategy Planner for Regular Income

It divides your investments into three parts: an income bucket holding 1–2 years of withdrawals in low-risk options, a stability bucket holding the next few years in hybrid or short-duration debt funds, and a growth bucket invested in equity for the long term. Your monthly income is always paid from the income bucket.

A regular SWP withdraws a fixed amount from a single fund, so units may be sold at low prices when markets fall. The bucket strategy draws income only from the safest bucket and refills it from the growth bucket after good years, so equity is not sold during a downturn.

A common starting point is 1–2 years of withdrawals in the income bucket, 3–5 years in the stability bucket and the rest in the growth bucket. The right split depends on your risk profile, other income and how long you need the money to last.

The income bucket usually holds liquid, overnight or arbitrage funds, or fixed deposits. The stability bucket holds balanced advantage, conservative hybrid or short-duration debt funds. The growth bucket holds diversified equity funds such as flexi-cap or large and mid-cap funds. Specific schemes should be chosen based on your risk profile.

Review once a year. Top up the income bucket from the stability bucket, and refill the stability bucket from the growth bucket only after a year in which equity has done well. In a falling year, the growth bucket is left alone.

Because the income and stability buckets together hold several years of withdrawals, you can keep drawing your monthly income through a fall without selling equity at low prices. The growth bucket gets time to recover before it is used to refill the other two.

It is the risk that poor returns arrive early in your withdrawal years. Selling investments after a fall to fund income locks in losses, and the corpus may never recover, even if average returns over the full period look healthy. The bucket strategy is designed to reduce this risk.

There is no fixed minimum, but the strategy works best when your yearly withdrawal is around 4–6% of the corpus. For example, ₹40,000 a month is ₹4.8 lakh a year, which suits a corpus of roughly ₹80 lakh to ₹1.2 crore. The planner above shows how long your own corpus could last.

Yes. FDs are a common choice for the income bucket because the value does not move with markets. The trade-off is that FD interest is taxed every year at your slab rate, whereas liquid or arbitrage funds are taxed only when you redeem.

Yes. Refilling a bucket means redeeming units from one fund and investing in another, and any gain on the units redeemed is taxed as capital gains under the rules for that fund type. Planning refills once a year and using the yearly exemption on equity gains helps keep this tax low.

Each bucket should be held in funds suited to its role, so in practice each bucket has its own scheme or schemes. Your monthly SWP is then registered only on the income bucket fund, which keeps withdrawals and yearly refills simple to track.

It suits anyone who needs a regular income from their investments for many years, such as retirees, people taking a career break, or returning NRIs living off their savings. It is less useful if you need the money within two or three years, as there is no time for the growth bucket to work.