The iBonds products are described at https://www.ishares.com/us/strategies/b ... nd-ladders; the Bulletshares products are described at https://www.invesco.com/us/financial-pr ... 3-products (you'll have to indicate to Invesco that you're an Individual Investor if prompted). The basic idea is that each ETF holds bonds maturing in a particular year, with a final payout in December of that year. I'd be using those payouts to fund a portion of my living expenses during the following calendar year.
In my particular scenario, in case it matters, I'll need approximately $51k, $48k, $46k, $43k, and $40k in each of 2024, 2025, 2026, 2027, and 2028 (with all values in 2020 dollars).
I've been planning on 50% Treasury, 30% Muni, and 20% Corporate for each rung but don't have any real reason for those percentages, other than that I thought since this will be "needed" income I should have roughly half of each rung in Treasuries.
What's a good way to think about appropriate allocations? Should high yield bonds be part of the mix? The higher expense ratios for the high-yield ETFs do give me pause, but maybe that's penny-wise and pound-foolish. Invesco even offers emerging market bonds (currently limited to ETFs paying out in 2021-2024) but I figure the volatility and risk associated with that asset class isn't a good fit for needed income. Maybe I should think otherwise.
I'll be assembling each year's set as a pie with M1 Finance so I'm perfectly happy to have a more-complex mix, including ETFs from both iShares and Invesco. For example:
- iShares Treasury 40%
- iShares Muni 10%
- Invesco Muni 10%
- iShares Corporate 10%
- Invesco Corporate 10%
- iShares High Yield 10%
- Invesco High Yield 10%
Would anybody be willing to offer a suggested allocation within a particular year's offerings? For example, an allocation for the 2026 rung. Having my "actual" income from these rungs be 10% less than planned wouldn't be of concern. 20% might be of concern. I'm not quite sure yet where the cutoff between acceptable and unacceptable might be; do feel free to steer me in a particular direction. I’d want a potential 10% reduction in available income to be offset by the possibility of at least 10% greater income were I to choose riskier ETFs.
Clearly there is, as with all investment decisions, a need to balance risk with reward, and I know I'm the only one who can make that determination, but I'd love to hear perspectives on how to pick the right allocation, for these types of ETFs, for term-certain spending needs. Thanks.