Hi proman. The 3 main drivers to winning the retirement savings game are to start saving early in your career, save as much as you can (10% of your income minimum) and have a diversified portfolio according to risk tolerance. I wouldn't agonize over fund choice too much. Fund choice IMO is a very distant contributor to the end-game compared to these other factors.
It would be my opinion that one of those Target Date funds would give you the allocation base you need. Use the retirement year as a guide, but make your decision based more on the funds stock/bond allocation. Take a look at how much these funds lost in 2008. Are you comfortable with short term loss knowing you don't need this money for another 30+ years? For example I see that the 2045 retirement fund, AOOIX, is about 78% stocks. It had a 1 year, 2008 loss of 33%. At 30 years old that might be a good choice for you, but you have to decide. If the fund is riskier then you can handle (based on 1 year loss potential) you may pull out at the very wrong time. If it doesn't have enough stock or risk at your age then you may be leaving a lot of money on the table 30 years from now.
Anyway, start with your allocation and then pick a few funds that get you to that allocation. And don't overlook the index funds when allotting, especially in the large cap area. And remember one fund like a Target Date fund might be all you need or at least be the core of your portfolio.
Save as much as you can and as soon as you can. That's the big deal. Good luck to you.
edit: oops, in my original post I used data from AAARX, the strategic fund. I changed the ticker to be AOOIX, the 2045 target date fund.

Hi proman:
Not familiar with AC's current lineup - though I did once invest with them and found them OK. Keep in mind that funds like the one you own (Aggressive is the tip-off here) are typically very volatile. Losses of 15-25% in a year followed by similarily large gains are not uncommon. Comes with the territory.
My sense is you'd be more at ease in some type of moderate allocation fund or a target date fund based on anticipated retirement year. And shucks ... There's nothing on your list along that line that I recognize or could recommend.
The one (more aggressive) choice that leaps to mind is T.Rowe Price's Growth Stock Fund (PRGFX). They're a great client-friendly house. And Lipper gives the fund its highest ratings. Another I've owned and liked is Oppenheimer's Global Growth (OPPAX). It also scores well at Lipper. R-Class would allow you to own Class A equivalent at Oppenheimer without paying the customary (near 5%) load. But be wary of many of Oppenheimer's other funds. You can lose a lot of money fast in some of them. And their allocation funds actually tack-on an extra "allocation fee", making them overly costly to own.
Please keep in mind that the two I mentioned specifically (at Price and Oppenheimer) are aggressive funds designed for long-term investors able to tolerate large swings in NAV.

M* stewardship grades supposedly take manager ownership of fund shares into account. From their (PDF) explanation of stewardship grades:
"Manager Ownership of Fund Shares
Fund managers who invest in the funds they run demonstrate conviction in their investment process and align their own financial interests with fund shareholders'. Morningstar analyzes fund-share ownership trends to determine whether a firm's managers meet the industry's highest standards. For non-U.S. fund firms, Morningstar surveys fund companies to determine the extent to which their fund managers' ownership illustrates industry best practices.
For U.S. fund firms, where funds report their managers' ownership annually to the SEC in the Statement of Additional Information, Morningstar will consider the percentage of the firm's fund assets where at least one of the fund's managers invests in fund shares more than $1 million, the highest ownership level reported to the SEC.
In all analyses of fund-ownership trends, Morningstar excludes types of funds where manager ownership would be difficult or impossible, including funds used only in insurance products, wrap accounts, or retirement plans. Morningstar also excludes fund of funds from the analysis."
If memory serves per what the stewardship pages used to include (text and figures for each component of the grade), they've stopped putting much effort into them; a few funds I looked at had only a summary for the fund family, not the fund itself, showing only an A, B, C etc. for each component of the grade, but no rationale besides the sketchy info in the summary.
The newer version of fund analyst reports, though, does show management ownership (at least for some funds, and of course for only the limited number of funds they do reports on) under the "People" rating rationale.
The reports and stewardship grades are 'premium' products. Otherwise, it's off to the SAI for each fund you're interested in for the info (which are usually linked on M* under the Filings tab).

A wise man once told me - at that time I didn't know he was wise - never invest more than half of your money regardless of how much money you have. This is completely contrary to any advice you will receive.
I am taking this advice. My "cash" position in my investment portfolio does not include 50% cash I have which I will never invest. I maximize my retirement accounts of course.

Hi All,
I am new to the investing world and am hoping for some advice on funds to invest in for my 401K portfolio. I am currently invested in one fund ( American Century Strategic Allocation: Aggressive ). This fund doesn't seem to perform as well as our advisor assumed. I would appreciate any advice anyone may have oh what I can do with these funds:
Percent
Invesco Stable Asset Fund
Putnam American Government Income Fund - Class R
PIMCO Total Return Fund - Class R
Oppenheimer Global Strategic Income Fund - Class R
Ivy High Income Fund - Class R
PIMCO Real Return Fund - Class R
AB Global Bond Fund - Class R
American Century One Choice In Retirement Portfolio - Class R
American Century One Choice 2020 Portfolio - Class R
American Century One Choice 2025 Portfolio - Class R
American Century One Choice 2030 Portfolio - Class R
American Century One Choice 2035 Portfolio - Class R
American Century One Choice 2040 Portfolio - Class R
American Century One Choice 2045 Portfolio - Class R
American Century One Choice 2050 Portfolio - Class R
American Century One Choice 2055 Portfolio - Class R
American Century Strategic Allocation: Conservative Fund - Class R
American Century Strategic Allocation: Moderate Fund - Class R
BlackRock Global Allocation Fund, Inc. - Class R
AB Equity Income Fund - Class R
BlackRock Equity Dividend Fund - Class R
Franklin Rising Dividends Fund - Class R
SSgA S&P 500 Index Securities Lending Series Fund - Class IX
BlackRock Capital Appreciation Fund, Inc. - Class R
Neuberger Berman Socially Responsive Fund - Class R3
T. Rowe Price Growth Stock Fund - Class R
BlackRock Mid Cap Value Opportunities Fund - Class R
Oppenheimer Main Street Mid Cap Fund - Class R
SSgA S&P MidCap Index Non-Lending Series Fund - Class J
Eagle Mid Cap Growth Fund - Class R3
Nuveen Mid Cap Growth Opportunities Fund - Class R3
Delaware Small Cap Value Fund - Class R
JPMorgan US Small Company Fund - Class R2
SSgA Russell Small Cap Index Securities Lending Series Fund - Class VIII
Lord Abbett Alpha Strategy Fund - Class R3
Nuveen Small Cap Select Fund - Class R3
MFS International Value Fund - Class R2
MFS Research International Fund - Class R2
Neuberger Berman International Select Fund - Class R3
SSgA International Index Securities Lending Series Fund - Class VIII
Oppenheimer International Diversified Fund - Class R
MFS International New Discovery Fund - Class R2
Oppenheimer Global Fund - Class R
RS Emerging Markets Fund - Class K
The Hartford Healthcare Fund - Class R3
Oppenheimer Gold & Special Minerals Fund - Class R
Deutsche Real Estate Securities Fund - Class R
Columbia Seligman Communications and Information Fund - Class R
I am 30 and just starting to invest so I need to catch up and willing to go aggressive for now. Any help or advice would be very much appreciated. I was planning on reallocating at least 90% of my current funds.
Thank you in advance

Doesn't fire-proofing funds reduce the potential return? Can I still invest in a very risky fund if I want to - knowing that increased risk often leads to increased return over longer periods? Do you really want your emerging markets bond fund or small cap equity fund to be as safe and secure as bank deposits (now yielding less than 1%)? Something in me doesn't like all these new rules.
However, if investors refuse to read the prospectus and excercise common sense in their fund purchases - perhaps this is the only alternative. I'd like instead some type of uniform "risk" label applied to all funds sold to the public. 4 or 5 different risk levels should be adequate. This would also give fund companies an incentive to structure their funds so as to qualify for a lower risk rating. Novice investors, those near retirement, etc. would know in advance which funds represented the higher risk of principal loss over the near term and would be cautioned to avoid these.
Many companies do exactly that. T Rowe Price does an excellent job displaying risk using bar graphs and than elaborates on that risk in their fund commentary. Even here, however, I suspect many ignore those classifications and invest more aggressively than prudent for their circumstances.
AAA

One use for such a fund....?
If the fund company allows you to establish withholding for your non-retirement fund accounts, then it would be an easy way to increase the amount of dollars that you have withheld with respect to your 2015 tax year..... ;^)

Your original question was: "Why then, doesn't the SEC require that mutual funds that own foreign dividend-paying stocks report two expense ratios"
In order to call for the reporting of two different ERs, it was necessary for you to establish two points: that foreign taxes paid should be included in the ER reported, and that (given that taxes paid are included in the ER) that the reported amount of foreign taxes paid by the fund should be different depending on whether the owner holds the fund in a taxable or tax-deferred account.
Stated that way, the second part sounds silly. A fund pays the same amount of dollars per share (of given share class) in expenses independent of who owns it.
Regardless, all I needed to do to address your original question was demonstrate a problem with either of the two points (include taxes in ER, and report them two different ways). I spoke primarily to the latter, though I touched tangentially on the former.
You cited Schwab (presumably with approval), that said the difference between a taxable account and a tax-deferred account was merely a timing issue - that in the tax deferred account "there's no deduction or credit currently available", but that nevertheless a foreign tax paid " reduces the amount of tax the IRS is able to collect when you start making withdrawals."
I simply explained what you had cited as a reference. Suggestion for the future - if you doesn't agree with everything on a page provided as a reference, don't cite it, or say explicitly what you are citing it for. "Resource" opens the whole page up to use.
The posts tossed in a lot of extraneous items, some of which generated more heat than light. For example, 12b-1 fees as the exemplar expense. Those fees come with a lot of baggage. You might have used almost any other fund expense instead.
Ideally, one might try to find another fund expense that closely resembled a foreign tax. I've an idea - how about a domestic government assessment (tax or fee) paid by a fund? There's the SEC Section 31 fee that brokers tack onto your sale of securities on an exchange. (It's that little fee, typically a few cents that you see on your sell trade confirms.)
Funds pay this government charge when they trade securities, so that's a similar expense. Oh wait, that isn't included in the ER either. Oh well :-)
Regarding the thesis that the "only case where it would be a 'timing issue' is the one where you paid taxes at a rate of 100% on the money withdrawn from the retirement account", it's easy enough to show that isn't correct.
We'll stay on point here and filter out as much noise as possible. We'll focus strictly comparing the impact of foreign taxes paid in a taxable account with their impact in an IRA by eliminating other sources of tax liability.
Assume that the original contribution was nondeductible (so that there's no tax due on the principal when withdrawn). Assume that all income generated by the fund comes in the form of nonqualified dividends (so the tax rate for the taxable and IRA accounts are the same). Assume no growth of principal. We'll assume that taxes are paid from another pocket, so that this extra cash doesn't clutter calculations either.
Getting back to my original example - in year 1, your investment earns dividends (after expenses other than foreign taxes) of $1.10. The investment pays $0.10 in foreign taxes, and distributes $1 in cash, while declaring that you have $1.10 in income. In year 2, assume no growth, no dividends. For our final assumption, we'll say that in year 2 you close out the IRA (and are over age 59.5 - no penalties).
Remember that I'm showing only that the result in the IRA is the same as taking a deduction (not a credit) in the taxable account.
Year 1:
Taxable account, have an extra $1 nonqualified cash dividend in your account. You declare income of $1.10 and a deduction of $0.10, for net taxable ordinary income of $0.025 (assuming 25% tax bracket).
IRA: You have an extra $1 in your account.
Year 2:
Taxable account - no change. You have the extra $1 in your taxable account, no taxes due.
IRA: No growth. You have your original post-tax investment and $1 of increased value. You close your account. You owe ordinary income of $0.025 on that $1 (which again comes from another pocket).
Same taxes owed. Just deferred a year. Timing.
---------------------------
The conceit is that the fund is a pass through entity. It passes some of the tax liability through to you. Notably, foreign taxes, but only sometimes. When it does, it is you not the fund paying the taxes. That happens by the fund giving you the full distribution (here $1.10), and then taking back the tax amount so that it can pay it for you.
That's not an expense of the fund (i.e. one included in the calculation of fund income passed through to you). It's your expense. As the IRS writes, "You can claim a credit only for foreign taxes that are imposed on you".
For the IRA investor, that foreign tax is a fee like any other - a brokerage commission, a load, a redemption fee, etc. The investor gets to treat that foreign tax collected from the IRA the same way as any other expense incurred by the IRA.
For the investor with a taxable account, the foreign tax is again an expense borne by the account, not by the fund. It is precisely because the investor (not the fund) is paying the tax that the investor gets to take a deduction or credit.

For example, consider two international funds and one international sector fund from Vanguard:
1. VTRIX - International Value Fund
2. VFWAX - FTSE All World Ex US Index Fund Admiral
3. VGRLX - Global Ex US Real Estate Index Fund Admiral
The funds yields are as of Sep 2015, tax information from last year, with expense ratios as noted below. 2014 tax info for each fund is from VG's Foreign Tax Center.

Ticker      Div Yield     Foreign Tax Paid   Expense Ratio  Div Yield x Forgn Tax Pd
VTRIX       2.72%         4.94%              0.44%           0.13%
VFWAX       2.99%         5.33%              0.14%           0.16%
VGRLX       3.22%         4.66%              0.24%           0.15%

The "unclaimable" foreign tax credit (for investors who hold the funds in tax -advantaged retirement accounts) appears in the last column of the above table, and is equal to the product of the [Dividend Yield] and [Foreign Tax Paid].
Compare this cost (for that is what it is, no?) with the investments' stated expense ratio.
While not "large" in absolute levels, it is about one-third of the ER of the actively managed fund, MORE than the ER of the world index fund, and more than half of the ER of the Global R/E fund.
Think that this sort of information should be disclosed by the funds for benefit of shareholders that don't have the time or resources to gather the information and calculate the numbers themselves.

msf - Thanks - But in the case where you hold the fund in a 'IRA' account, there is tax withheld by foreign government, and you don't have ability to claim a credit or a deduction for the foreign governments' withholding.
As for Schwab saying (at link in OP):

Think of it as a timing issue: The amount you pay in foreign taxes today reduces your retirement assets, and therefore reduces the amount of tax the IRS is able to collect when you start making withdrawals.

How is that any different from holding a fund with a higher expense ratio, rather than a lower expense ratio? Could I, for example, say the following with a straight face?:

Think of it as a timing issue: The amount you pay in higher expenses foreign taxes today reduces your retirement assets, and therefore reduces the amount of tax the IRS is able to collect when you start making withdrawals.

Which is precisely my point.
If I was trying to convince someone of the wisdom of buying a fund with a 12b-1 fee [*] as opposed to buying the same fund without the 12b-1 fee, would they find it convincing if I said Think of it as a timing issue?
It's not a timing issue. I believe that it's effectively a higher expense ratio, caused by the decision to hold an asset subject to foreign tax withholding in a retirement account.
--------------------------------------------------
[*] www.investopedia.com/terms/1/12b-1fees.asp
PS: I think that the only case where it would be a "timing issue" is the one where you paid taxes at a rate of 100% on the money withdrawn from the retirement account. Well ... we're not there .... yet.

With respect to foreign dividend funds/ETFs (such as those in registration at Vanguard, or offered by Wisdom Tree, others, etc.)...
The SEC requires that funds that hold >25% of their holdings in MLPs to be taxed as corporations, and accrue a deferred tax liability, which is included in the reported expense ratio of the the funds.
See for example, disclosure from AMLP, available here: http://www.alpsfunds.com/documents/pdfs/amlp-edu-20120509.pdf and expense ratio, as listed at left here: http://www.alpsfunds.com/resources/AMLP.
Why then, doesn't the SEC require that mutual funds that own foreign dividend-paying stocks report two expense ratios:
1. One expense ratio for taxable investors; and
2. One expense ratio for non-taxable investors (such as those investing through IRA accounts, for example).
While foreign taxes paid are - to some extent - recoverable via foreign tax credit or deduction, any credit can not be obtained when the funds are held in a retirement account.
Shouldn't the additional "locational burden" be disclosed, on either a mandatory (SEC) or voluntary basis? Is anyone aware of any fund that highlights the extra cost in their prospectus or annual report?
Other resources below. Thanks.
Tax Rate Schedule, circa 2011 [for example, see second table]
http://topforeignstocks.com/2011/01/23/withholding-tax-rates-by-country-for-foreign-stock-dividends/
Investopedia on Foreign Tax Credit
http://www.investopedia.com/articles/personal-finance/012214/understanding-taxation-foreign-investments.asp
Schwab on Claiming Foreign Tax Credit Deduction
http://www.schwab.com/public/schwab/nn/articles/Claiming-Foreign-Taxes-Credit-or-Deduction

@ibartman - thanks for the links. The second one says that Fidelity was the record keeper for USAirways while JPMorgan Retirement Plan Services was the record keeper for AA.
I'd seen the latter as the major owner of AMR shares when I looked through the American Beacon SAI. That is, JPMorgan was investing the plan assets in American Beacon funds.
Technically, what that means is that just because the bookkeeper for the plan is changing, the investments don't have to change. Pragmatically, it sounds like a done deal that Fidelity will move the plan out of American Beacon funds.

September 11, 2015. The retirement savings plans are in flux at American Airlines
Fallout from American/USAir merger?
See links/below.
LINK: http://www.advisorllp.com/company-benefits/american-airlines/

In the coming weeks, according to American Airlines, the current American Airlines $uper $aver 401(k) Plan will be renamed the American Airlines, Inc. 401(k) Plan. Employee accounts from the US Airways Employee Savings Plan will also begin merging into the new Plan. This includes legacy US Airways flight attendant and non-contract employee accounts. Accounts for the legacy US Airways groups that have not reached joint ratified contracts will, for now, remain in the Employee Savings Plan.
Pilot accounts in the legacy American $uper $aver, and the legacy US Airways 401(k) Plan for Pilots and Future Care plans will move to a new American Airlines, Inc. 401(k) Plan for Pilots. The legacy Retirement Savings Plan for Pilots of US Airways, Inc. will remain separate at this time, however, upon the effective date of the new Pilot 401(k) Plan, the company contribution for these pilots will be made to the new Pilot 401(k) Plan.
The new Plan accounts are composed of a core account and an optional BrokerageLink® account.
AFS manages our clients’ 401(k) accounts using the BrokerageLink® option. As an institutional level adviser, we have access to more funds and ETFs (about 20,000) as well as more cost efficient share classes than normal retail BrokerageLink® accounts. We have also negotiated with Fidelity, the plan custodian, and have been able to reduce transaction fees by 67% (as compared to retail accounts) for mutual funds that charge them.

http://www.pionline.com/article/20141027/ONLINE/141029880/american-airlines-picks-fidelity-as-sole-provider-for-401k-plans

American Airlines Inc., Fort Worth, Texas, hired Fidelity Investments as sole provider for its 401(k) plans, starting in mid-2015, said Elise R. Eberwein, executive vice president, people and communications, for American Airlines, in an e-mail...[more]

http://www.benefitspro.com/2014/10/28/fidelity-wins-americans-401k-plan

Fidelity Investments will assume the responsibility for American Airlines’ 401(k) participants beginning in the middle of 2015.
The new relationship comes on the heels of the American and US Airways merger, announced in December of 2013. Fidelity has provided retirement services to US Airways since 1993.... [more]

They're struggling. American Beacon was American Airlines retirement system once upon a time. The share class that they're eliminating, AMR, points to the ticker symbol for American Airlines' parent company. American Beacon is eliminating most of their vanilla line-up in anticipation of significant year-end redemptions; I'm guessing that they've lost a major retirement contract - maybe with American? - and are scrambling to regain their footing.
David

@ducrow - Thanks for the question. Following is my Buy & Hold group. Many are of the balanced and allocation variety. A lot of this evolved over the years by placing square pegs (funds already owned) into round holes (different sleeves within the plan) ... so it makes sense to me, but wouldn't be a model I'd recommend to anyone else,
Multi-Income - RPSIX 18-22%
Balanced - RPGAX and DODBX 18-22% combined
Hybrids - OAKBX, PRPFX, and TRRIX 12-15% each
Hard Assets - (currently 3 funds) about 10% combined
Global Income - (currently 2 funds) about 10% combined
Above represents approximately 75% of retirement assets. Rebalancing is minimal.
More to your specific question
Balanced funds: DODBX and RPGAX
Allocation funds: RPSIX and TRRIX
OAKBX is sometimes called balanced. I consider it "moderate allocation - equity."
PRPFX is sometimes called allocation. I'd call it a "specialty" fund.
Outside Buy & Hold, I own PRWCX. It is sometimes called balanced. I'd call it "moderate allocation-equity".

http://www.sec.gov/Archives/edgar/data/1368578/000116204415000977/amm497201509.htm
497 1 amm497201509.htm
AMM Funds
Fallen Angels Value Fund
Supplement dated September 17, 2015 to
the Prospectus and Statement of Additional Information dated December 1, 2014
The Board of Trustees of the AMM Funds (the “Trust”), with respect to the Fallen Angels Value Fund (the “Fund”), a separate series of the Trust, has concluded that it is in the best interests of the Fund and its shareholders that the Fund ceases operations. The Board has determined to close the Fund, and redeem all outstanding shares, on October 16, 2015 (the “Liquidation Date”). The Liquidation Date may be changed without notice at the discretion of the Trust’s officers.
Effective immediately, the Fund will not accept any new investments and will no longer pursue its stated investment objectives. The Fund will begin liquidating its portfolio and will invest in cash equivalents such as money market funds until all shares have been redeemed. Any capital gains will be distributed as soon as practicable to shareholders and reinvested in additional shares, unless you have previously requested payment in cash.
After September 17, 2015 and prior to October 16, 2015, you may redeem your shares, including reinvested distributions, in accordance with the “How to Redeem Shares” section in the Prospectus. You may choose to redeem your shares as a “redemption in kind” as per the Prospectus. You may incur transaction expenses in converting these securities to cash if you choose to do an in-kind redemption. Unless your investment in the Fund is through a tax-deferred retirement account, a redemption is subject to tax on any taxable gains. Please refer to the “Tax Status, Dividends and Distributions” section in the Prospectus for general information. You may wish to consult your tax advisor about your particular situation.
ANY SHAREHOLDERS WHO HAVE NOT TRANSFERRED THEIR SHARES OF THE FUND PRIOR TO 4:00 P.M. EASTERN TIME ON OCTOBER 16, 2015, WILL HAVE THEIR SHARES AUTOMATICALLY REDEEMED AS OF THAT DATE, AND PROCEEDS WILL BE SENT EITHER BY CHECK TO THE ADDRESS OF RECORD OR VIA ACH TO THE BANK ACCOUNT ON RECORD. The Fund reserves its right to redeem large shareholder in kind. If you have questions or need assistance, please contact your financial advisor directly or the Fund at 1.858.755.0909.
IMPORTANT INFORMATION FOR RETIREMENT PLAN INVESTORS
If you are a retirement plan investor, you should consult your tax advisor regarding the consequences of a redemption of Fund shares. If you receive a distribution from an Individual Retirement Account or a Simplified Employee Pension (SEP) IRA, you must roll the proceeds into another Individual Retirement Account within sixty (60) days of the date of the distribution in order to avoid having to include the distribution in your taxable income for the year. If you receive a distribution from a 403(b)(7) Custodian Account (Tax-Sheltered account) or a Keogh Account, you must roll the distribution into a similar type of retirement plan within sixty (60) days in order to avoid disqualification of your plan and the severe tax consequences that it can bring. If you are the trustee of a Qualified Retirement Plan, you may reinvest the money in any way permitted by the plan and trust agreement.
This Supplement, and the existing Prospectus and Statement of Additional Information dated December 1, 2014, provide relevant information for all shareholders and should be retained for future reference. Both the Prospectus and the Statement of Additional Information dated December 1, 2014 have been filed with the Securities and Exchange Commission, are incorporated by reference, and can be obtained without charge by calling the Fund at 1.858.755.0909.

FYI: Its allocations illustrate that even 40-somethings should be mostly in stocks.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=714414

I actually like the idea of creating a mechanism that funds bucket one throughout the entire investment time frame by taking profits during periods of market out performance. Always nice to have some dry powder for emergencies, buying opportunities, or to reduce portfolio volatility.

Yes, I agree completely and was fortunate that my retirement happened after a multi-year run-up, with the accumulation of bucket one assets during that period. I'd rather be lucky than good.
The key benefit of this bucketing approach is that it allows a retiree to not obsess about what is happening in the market since you have several years of expenses already in pocket. I personally differ a bit from what M* lays out, in that I have more years of funds in bucket one, but take a bit more aggressive approach in how the overall funds are invested.
press

I'm looking at this strategy backwards.
If I were 11+ years away from retirement I would hold only bucket three, but add NAESX to the portfolio. Percentages could be adjusted in bucket three to make it more or less aggressive depending on individuals age and risk tolerance.
When 3-11 years away from retirement hold buckets 2 & 3. Again, phase into this bucket 2 over the 8 years by using profits raised from bucket 3 or from new investment contributions.
When you are 1-2 years away from retirement be sure to raise enough cash to create bucket 1 by reallocating from buckets 2 & 3. Continue reallocating into bucket one from buckets 2 & 3 throughout retirement for distribution needs and during periods of bucket out performance.
I actually like the idea of creating a mechanism that funds bucket one throughout the entire investment time frame by taking profits during periods of market out performance. Always nice to have some dry powder for emergencies, buying opportunities, or to reduce portfolio volatility.

FYI: Geared toward retirees with shorter time horizons, this portfolio includes a heavy stake in bonds and cash.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=714280