One IFLM user is advisor John Barton, whose Wichita, Kan.-based firm, CenterPointe Wealth Management, is affiliated with Securities America, a broker/dealer that licenses IFLM from Wealth2K. So far, he likes it.

"IFLM addresses the question, 'Once I retire, how do I structure my portfolio to generate money with a high degree of confidence?,'" Barton said. "It's designed for folks who say, 'You've shown me the big picture. Now how do I replace my salary when I retire?' It addresses a subset of the financial planning process."

Barton likes IFLM because it provides a structure that his heirs could easily transfer to another adviser if he dies, it encourages collaboration between client and adviser, its product-neutral architecture won't compromise his own objectivity, it helps the client avoid selling stocks in a down market, and because, in today's unpredictable market, systematic withdrawal plans aren't enough.

"During the first 20 years of my career we were in a bull market, and drawing income was less problematic," Barton said. "You did systematic payments from your accounts and the darn things kept going up in value. That whole strategy has now come into question, that's why I've gravitated to IFLM."

Not everyone agrees that bucket methods are a panacea for retirees who want protection from sequence-of-returns risk-the risk that an ill-timed downturn will force a new or near-retiree to spend shrinking assets.

In his new book, Are You a Stock or A Bond: Create Your Own Pension Plan for a Secure Financial Future (FT Press, 2009), York University Finance Professor Moshe A. Milevsky compared a simple bucket method with a systematic withdrawal plan and found that the bucket method yielded higher returns in only 16 of 27 market scenarios.

Milevsky argues that a bucketer "implicitly has a more aggressive [equity] asset allocation as he progresses through retirement" and incurs the risks that inevitably accompany a higher exposure to equities.

One adviser thinks, as Barton does, that the IFLM method can be a powerful behavioral tool. "It might be valuable from a psychological standpoint, because the client doesn't have to worry about his income in the immediate future," said Robert Kreitler of Kreitler Associates, an LPL-affiliated adviser in New Haven, Conn.

"The long-term money might be bouncing around in value but he doesn't worry about that because he doesn't need it yet. So psychologically it would help. But I think if you ran the numbers it would not be very different from having all the money in one portfolio, and rebalancing every year."

In "Tools and Pools," a chapter in Harold Evensky and Deena Katz' book, Retirement Income Redesigned (Bloomberg, 2006), Kreitler describes a five-pool system that assigns money to an income pool consisting of Social Security, pensions and income annuities; a bequest pool; a medical reserve; a pool for enhancing income if needed; and a surplus pool for travel, home improvements, or charity.

Another type of bucket system that's been written about by Mitch Anthony and is often associated with Briggs Matsko is the pyramid system that blends finance with psychologist Abraham Maslow's hierarchy of basic and higher needs. It proposes a "hierarchy of financial needs."

In this five-tier pyramid, savings are dedicated first to "survival money," then to "safety money," "freedom money," "gift money," and, finally, to "dream money." Of course, before using this system, clients have to search their souls to quantify their basic survival needs and the relative importance of their higher aspirations.

Originally published in Retirement Income Reporter.