Re safety of money market funds, it's a mystery... they are clearly not as safe as an FDIC-insured bank account, but they are probably very safe. But the reason it is a mystery is that clearly, after some forty years of safety and stability, things have changed
. Do read Valuethinker's post on Systemic Dangers--issues re personal investing.
The famous money market fund failure was Reserve Primary, particularly shocking as it was one of the oldest or perhaps the
oldest money market fund. Although fund shareholders got very close to all of their money back--I think it was well over 95%, maybe 98%--it took something like two years. They had no access at all to their money for months, then got it back in chunks, something like half back within a year.
Money market funds are like banks were before the Fed and the FDIC: their safety is based on the integrity of the fund managers and their prudence in what they invest in. After the bank failures of the Great Depression, the FDIC was instituted and banks were subjected to a lot of pesky regulations in the public interest. Money market funds were conceived as an end-run, a way to provide a bank-like product without those pesky bank regulations, and before Reserve Primary, had been managed conservatively enough that they had been safe. Would you or I have spotted the problems in Reserve Primary before it failed? I don't know about you, but I can answer for me: no, I would not have.
Re "cash + LT bonds," one thing I would be concerned about is your ability to state the course in that combination. I think the bond bubble talk is wildly overhyped, and while I sure hope interest rates eventually rise, people show far greater certainty about how things will play out than they should. Nevertheless, if there is a sharp, large rise in interest rates, the Vanguard long-term bond fund has a 15-year duration, while Total bond has a 5-year duration. It will drop three times as much as Total Bond does. And it will take longer to recover. If one imagines a 2-3% rise in interest rates, Long-Term Bond Index could conceivably fall 30-45%, Now since it will only be 1/3 of your holdings, indeed, your total fixed income will only fall 10%-15%, but you probably won't see it that way--you'll see the two slices separately and you'll see the long-term fund get beaten up pretty badly. Will you be able to hang on if that happens?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.