where to park next 2 years of retirement spend(money market or ST bond fund)

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LearningAlot
Posts: 45
Joined: Thu Aug 02, 2018 8:43 am

where to park next 2 years of retirement spend(money market or ST bond fund)

Post by LearningAlot »

I have been carrying my "non equity" IRA investment in an intermediate bond fund. Thinking I should
start keeping a couple years of spending in either a money market fund or ST bond fund, in the event
interest rates rise and the share price drops on the intermediate bond fund (it has a 6.4 year duration).

Would appreciate any advice and suggestions on the matter.

Thanks in advance!
lakpr
Posts: 6209
Joined: Fri Mar 18, 2011 9:59 am

Re: where to park next 2 years of retirement spend(money market or ST bond fund)

Post by lakpr »

With a 2-year horizon for use of these funds, either of these funds is an excellent fit for your purpose:

Vanguard Short Term Bond Index fund (VBISX) has a duration of 2.75 years
Vanguard Short Term Treasury Index fund (VFIRX) has a duration of 2.21 years

Since treasuries are state-tax exempt, depending on your state, even with the lower yield VFIRX may be a better fit (1.95% for VBISX vs 1.38% for VFIRX).

The minimum for VFIRX is $50k, though ... so please take that into consideration as well.
Last edited by lakpr on Sat Aug 08, 2020 7:41 am, edited 1 time in total.
burritoLover
Posts: 374
Joined: Sun Jul 05, 2020 12:13 pm

Re: where to park next 2 years of retirement spend(money market or ST bond fund)

Post by burritoLover »

High yield savings account - FDIC insured so no risk of loss of principal.
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
Old Sage(brush)
Posts: 158
Joined: Sat Dec 08, 2018 8:27 am

Re: where to park next 2 years of retirement spend(money market or ST bond fund)

Post by Old Sage(brush) »

I’ve seen Schwab SWVXX mentioned in this forum for this purpose although it has been a while and I’ve not looked at it recently. The suggestion of high yield savings with benefits of insurance makes sense to me since in current interest and general conditions principle preservation is by far most important with that timeline.
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anon_investor
Posts: 3726
Joined: Mon Jun 03, 2019 1:43 pm

Re: where to park next 2 years of retirement spend(money market or ST bond fund)

Post by anon_investor »

LearningAlot wrote: Sat Aug 08, 2020 7:19 am I have been carrying my "non equity" IRA investment in an intermediate bond fund. Thinking I should
start keeping a couple years of spending in either a money market fund or ST bond fund, in the event
interest rates rise and the share price drops on the intermediate bond fund (it has a 6.4 year duration).

Would appreciate any advice and suggestions on the matter.

Thanks in advance!
Consider Vanguard Short-Term Federal Fund:
https://investor.vanguard.com/mutual-fu ... file/VSGBX

With a 1.9 year duration and nearly 88% in US government bonds, it is pretty safe.
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