One of the key strategic decisions advisors who work with retiring clients face is whether to use systematic withdrawals or the "bucket" approach to serve investors transitioning from asset accumulation during their working years to income distribution during retirement. While these are not the only strategies, they are the two most popular and the debate over these two retirement income strategies is a fixture at financial advisor conferences.

To help advisors understand the trade-offs, the Principal Financial Group has released a new white paper that explores the relative merits of these two approaches. The paper, which assumes a generally neutral stance, walks advisors through both the advantages and shortcomings of both approaches.

There are different kinds of bucket approaches, but the white paper is based on the most popular approach, which allocates client assets according to early, later and more distant phases of retirement. For the earliest phase (which could be, say, three or five, years), advisors would set aside a "bucket" that will meet the client's income needs through cash and cash equivalents; for a middle phase that might extend from, say, five to 15 years, advisors would set aside a portion of fund that are invested in fixed-income securities; and the third bucket, designed to meet needs for 15 or more years away, advisors will allocate equity investments that exhibit greater volatility but which may generate greater returns.