Market volatility can understandably make retirees  and those saving for retirement  nervous. After all, since 1928, there have been 26 bear markets. Fortunately, there are ways to protect against inevitable market downturns.

At Kiplinger, Brandon Domenick, a managing partner at Capital A Wealth Management, argues that retirement income should depend on math, not the market. Using a hypothetical example of a couple with $1 million saved approaching retirement, Domenick divides that money into three buckets.

Safety bucket

To ensure a smoother ride during retirement, it’s a good idea to have money on deck for unexpected emergencies. Investors should contemplate how much they need in this bucket to feel comfortable, in case the car needs new tires, the roof leaks, or some other crisis, small or large, occurs. While everyone’s specific amount may vary, Domenick suggests that putting $50,000 in the safety bucket gives the hypothetical couple with $1 million in retirement savings a good beginning to then explore how to manage the rest of their savings.

Income bucket

“Let’s say our couple settle on an income goal of $6,000 a month, and they expect to receive $2,000 a month each from Social Security, for a total of $4,000,” wrote Domenick. “That means there’s a $2,000 gap they need to fill between what Social Security provides and their income goal.”

Domenick suggests that one way to bridge the gap would be to purchase an annuity, with the potential of offering a guaranteed monthly income. Now with the monthly expenses taken care of, this couple can move to the next piece of this math problem: determining what’s left for long-term investment purposes.

Growth bucket

This is the bucket where retirees can be a bit aggressive with investments now that the safety and income buckets have been taken care of. It’s also a bucket that can go down in value if the market drops, so this shouldn’t be money to dip into any time soon.

While Las Vegas-style gambling isn’t recommended, retirees can build a portfolio that can withstand a little risk. For example, it may be okay to lean a little heavier on equities and a bit lighter on bonds than the 60/40 split that’s often recommended.

“One of the great things about this three-bucket approach is the possibility of taking advantage of market growth without having your entire retirement fortunes tied to it,” Domenick wrote.

Nationwide offers a variety of actively managed ETFs for advisors that cater to a range of investment exposures and strategies for those seeking retirement income options for their clients as part of their bigger retirement planning pictures.

For more news, information, and strategy, visit the Retirement Income Channel.