Michael Kitces wrote an interesting article comparing “Decision Rules” vs. Rebalancing. He finds that rebalancing under a total return approach has essentially the same results using the “Safe Withdrawal Rate” (SWR) decision rules. I posted a blog a short time ago that compares the SWR approach to a Dynamic Updating approach.
I have always maintained that retirement income essentially is a Total Return approach because the long term portfolio is the source of the funds for any of the “buckets,” be they one or many. When one looks at the overall combined asset allocation of all the buckets and the long term portfolio all combined, you ultimately derive one total allocation with the weighted average of all of its’ components; in other words, a total return with standard deviation.
This said, I do use a two bucket approach for a variety of reasons. However, the income bucket (source of funds going into the checkbook) is comprised of short term bonds (less than 5 years duration funds) and cash for the reason illustrated in the graphic below … Short term bonds have better risk vs return characteristics.