I am a long-time reader (back to M* days), but post infrequently.
Thanks to you all, and some good fortune, I am approaching an early retirement in a couple of years at age ~57. I am trying to position myself for a secure future, and wanted to bounce some thoughts off of you. I am contemplating transitioning my viewpoint to a LMP/RP (liability matching portfolio/risk portfolio) outlook.
The short story: I am 55, my wife is 53, no kids. Current assets are ~$1.6M in a very Bogleheadish portfolio. A key factor is that we both will have nice pensions to provide much of the income stream needed in retirement. (We also have health insurance covered, and our house will be paid off well before retirement.)
I am targeting ~$110k in annual spending (which is more than we spend now, ~$90k). Our pensions will be ~$58k, and roughly COLA’ed. Therefore, for the period between retirement and SS (hopefully at 70), I estimate we will need to draw about $52k from our portfolio, which is a WR of ~3.25%. After starting SS, pension+SS should more than meet our needs. So it seems to me that just about any withdrawal tactic I use will work. (Yes, we are fortunate.)
With that in mind, I have been contemplating subscribing to the Bobcat2/Bill Bernstein/Zwecher/Bodie/Paula Hogan approach, namely, purchase safe assets to provide an income floor for peace of mind. In my case, I believe that I would only have to cover to age 70, letting the pension and SS be the floor from 70 onwards. A TIPS ladder providing the flooring to age 70 would cost about $900k, leaving about $700k for the Risk Portfolio (RP), which could be invested more aggressively. The RP could be used for lumpy spending.
This appeals to me, but it seems one could look at this from a multitude of perspectives. I have always been a “total return guy,” trying to choose my AA during accumulation to bear what I felt was the appropriate amount of risk. (I am at about 60/40 now, and have been targeting 58/42 as the “permanent” AA during decumulation.)
One could look at this proposed move as a “bucket strategy”: spend first from the TIPS bucket, while “preserving” the RP bucket. This kind of reasoning has always seemed like “mental accounting” to me, in a pejorative sense. I must admit, however, that I have come to see that “mental accounting” is not inherently wrong; it can be a useful heuristic.
Or, you could say that if I were to purchase $900k of TIPS, then keep the RP at a reasonably aggressive AA (say 80/20), then my effective AA at retirement would be 30/70. As I spent down the TIPS, my AA would revert back to 80/20 by age 70. From this perspective, this smells more like a Pfau/Kitces/Early Retirement Now scheme of raising one’s equity share during retirement. The notion is that this would help insulate me from a poor sequence of returns early in retirement, but allow for some upside over a longer time period with the RP. (I.e., Kitces’s “bond tent.”) I am aware that Kitces has pointed out the similarity of “bond tent” and “buckets.”
Or, I can look at this from a Total Return perspective; here, a 30/70 AA seems too conservative, especially since we seem to have the ability (if not the need) to bear more risk. Am I guilty of myopic loss aversion (MLA)? Could we not simply sally forth with a 60/40 AA and 3.25% WR, and suffer through any poor market period, while confident that eventual returns would more than make up for the shortfall?
I am leaning towards splitting the difference: dedicating enough funds (~$600k) to provide a flooring of ~$90k/year, and leaving a larger RP, and live with a little more volatility. (This would give an effective AA at retirement of about 45/55.) Maybe use VPW for the RP?
Actionable questions:
-Do you see any flaws in my thinking?
-Hell, do you have any advice for me?

-Whatever split I eventually decide on, would it be prudent to ramp up my bond purchases over the next 2 years to make my AA at retirement match my eventual LMP/RP split?
Thanks!
PaulF