What's Your Fixed Income Strategy?

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mmnj
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Joined: Tue Jul 17, 2018 12:10 pm

What's Your Fixed Income Strategy?

Post by mmnj » Mon Oct 22, 2018 2:27 pm

There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
    Years to retirement or already in retirement?(how many years in?)
    Fixed income allocation as part of total allocation (Equity/Fixed Income)
    Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
    What's your Philosophy?
    What's your Strategy?

    jacksonm
    Posts: 38
    Joined: Tue Oct 16, 2018 11:48 am

    Re: What's Your Fixed Income Strategy?

    Post by jacksonm » Mon Oct 22, 2018 2:52 pm

    Years to retirement or already in retirement?(how many years in?) Retired 2 years. Wife still working.
    Fixed income allocation as part of total allocation (Equity/Fixed Income) 20%
    Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..) All T-Bills except for checking account
    What's your Philosophy? Live and let live
    What's your Strategy? I use the Golden Butterfly variant of the Permanent Portfolio strategy

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    mhc
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    Re: What's Your Fixed Income Strategy?

    Post by mhc » Mon Oct 22, 2018 3:15 pm

    0-9 years from retirement
    25% fixed income
    100% TBM (all of it in 401k)
    keep it simple, low cost, well diversified
    use TBM

    123
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    Joined: Fri Oct 12, 2012 3:55 pm

    Re: What's Your Fixed Income Strategy?

    Post by 123 » Mon Oct 22, 2018 3:36 pm

    jacksonm wrote:
    Mon Oct 22, 2018 2:52 pm
    Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..) All T-Bills except for checking account
    +1 Sure it seems like market timing but interest rates have been on the rise and it's been time for us to get out of 2 to 5 years CDs as they've matured and be ready to follow rising rates. I just hate the tax issues of bond funds in taxable accounts for fixed income (Yes we have most of our bonds in IRAs) so we're mostly in CDs and Treasuries for taxable fixed income.
    The closest helping hand is at the end of your own arm.

    gregwils
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    Re: What's Your Fixed Income Strategy?

    Post by gregwils » Mon Oct 22, 2018 3:50 pm

    6 years from retirement
    30% fixed income (heaviest in tax deferred accounts)
    90% TBM 10 % MM
    keep it simple, low cost, well diversified (copied from mhc post - complete agreement)
    use TBM/MM for now, may consider TIPS for a portion at a later date.

    Dottie57
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    Re: What's Your Fixed Income Strategy?

    Post by Dottie57 » Mon Oct 22, 2018 3:53 pm

    401k - Best bond fund offered. Dodge and Cox Income. Also Stable Value Fund.
    Roth - no bonds
    trad IRA - total bond at fidelity plus 3 Cds
    Bank -3 Cds

    All Cds bought this year and need 2 more setup.

    CD ladder to SS. Then less needed.

    mmnj
    Posts: 17
    Joined: Tue Jul 17, 2018 12:10 pm

    Re: What's Your Fixed Income Strategy?

    Post by mmnj » Mon Oct 22, 2018 3:58 pm

    Dottie57 wrote:
    Mon Oct 22, 2018 3:53 pm
    401k - Best bond fund offered. Dodge and Cox Income. Also Stable Value Fund.
    Roth - no bonds
    trad IRA - total bond at fidelity plus 3 Cds
    Bank -3 Cds

    All Cds bought this year and need 2 more setup.

    CD ladder to SS. Then less needed.
    How many years to retirement?

    Random Walker
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    Joined: Fri Feb 23, 2007 8:21 pm

    Re: What's Your Fixed Income Strategy?

    Post by Random Walker » Mon Oct 22, 2018 4:10 pm

    I’m 55 years old. My philosophy is that bonds are for safety: to dampen overall portfolio volatility to somewhat tolerable level. I take all my risk on the equity side. Therefore my bonds are all high quality and short to intermediate term. I use high grade municipal in a taxable account with average maturity 5-6 years. My asset allocation is 40% equities heavily tilted to size and value, 24% tax inefficient alternatives, 36% muni bonds. At the very short end of my bond ladder I have CDs. I believe the after tax yields on 1-3 year CDs generally better than short bonds.

    Dave

    Dottie57
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    Re: What's Your Fixed Income Strategy?

    Post by Dottie57 » Mon Oct 22, 2018 4:12 pm

    mmnj wrote:
    Mon Oct 22, 2018 3:58 pm
    Dottie57 wrote:
    Mon Oct 22, 2018 3:53 pm
    401k - Best bond fund offered. Dodge and Cox Income. Also Stable Value Fund.
    Roth - no bonds
    trad IRA - total bond at fidelity plus 3 Cds
    Bank -3 Cds

    All Cds bought this year and need 2 more setup.

    CD ladder to SS. Then less needed.
    How many years to retirement?
    Retired this year. 1 year of severance, so I start spending from retirementnext next year.

    TravelforFun
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    Joined: Tue Dec 04, 2012 11:05 pm

    Re: What's Your Fixed Income Strategy?

    Post by TravelforFun » Mon Oct 22, 2018 4:22 pm

    - 4 years from filing for max SS benefits
    - I have 10 years worth of annual expenses in fixed income which includes approx. 60% bonds, 30% of CDs, and 10% money market.
    - I'll continue to increase my CD holding and reduce my bond holding as interest rate increases.

    TravelforFun

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    Rob54keep
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    Re: What's Your Fixed Income Strategy?

    Post by Rob54keep » Mon Oct 22, 2018 4:40 pm

    In retirement now for 3 years (retired at 60). AA 40/60. Bond Allocation is split between Total Bond Index, Short Term Investment Grade, CD-ladder, some I-Bonds and a Stable Value Fund (from a previous 401k).

    Currently withdrawing monthly from the Stable value (has highest expense ratio of 0.28). This will take me to social security at age 68?-70?. I also take dividends (and do tax withholding) from the short-term investment grade to manage yearly tax payments. I may never use the stock funds but have been doing partial Roth conversions with taxes in mind between age 60-70.
    Last edited by Rob54keep on Mon Oct 22, 2018 4:40 pm, edited 1 time in total.

    Random Poster
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    Re: What's Your Fixed Income Strategy?

    Post by Random Poster » Mon Oct 22, 2018 4:40 pm

    [
      Years to retirement or already in retirement?(how many years in?) Don't know. Maybe retirement in 5 months, maybe in 1 year, maybe in a few years.
      Fixed income allocation as part of total allocation (Equity/Fixed Income) 50% equity, 50% fixed income.
      Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..) Roughly 50% total bond market fund, 50% intermediate term tax exempt fund.
      What's your Philosophy? I'm not sure that I have one.
      What's your Strategy? I'm not sure that I have one.

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      siamond
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      Re: What's Your Fixed Income Strategy?

      Post by siamond » Mon Oct 22, 2018 4:45 pm

      Years to retirement or already in retirement?(how many years in?): 4 years in early retirement (mid-50s)

      Fixed income allocation as part of total allocation (Equity/Fixed Income): 20% (well, not counting SSA/Pensions to come, otherwise it's roughly 50/50 in net present value).

      Allocation within the fixed income allocation (Bond funds, CDs, Money Market, etc..): all in VBILX (i.e. US bonds, 50% govt, 50% corp), in tax-deferred accounts. I might elect to go fifty/fifty with Int'l bonds at some point.

      What's your Philosophy? I view this bonds position as a glorified emergency fund. I care much more about long-term risks (e.g. inflation, declining purchasing power, longevity) than short-term risks (e.g. volatility). Still, emotions have to be taken in account. Hence the 'glorified' emergency fund.

      What's your Strategy? Fixed AA for life, high equity exposure (fully diversified US/world).

      mmnj
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      Re: What's Your Fixed Income Strategy?

      Post by mmnj » Mon Oct 22, 2018 6:51 pm

      Random Walker wrote:
      Mon Oct 22, 2018 4:10 pm
      I’m 55 years old. My philosophy is that bonds are for safety: to dampen overall portfolio volatility to somewhat tolerable level. I take all my risk on the equity side. Therefore my bonds are all high quality and short to intermediate term. I use high grade municipal in a taxable account with average maturity 5-6 years. My asset allocation is 40% equities heavily tilted to size and value, 24% tax inefficient alternatives, 36% muni bonds. At the very short end of my bond ladder I have CDs. I believe the after tax yields on 1-3 year CDs generally better than short bonds.

      Dave
      Are you retired? That would explain 40/60 at age 55.

      mmnj
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      Re: What's Your Fixed Income Strategy?

      Post by mmnj » Mon Oct 22, 2018 6:53 pm

      Dottie57 wrote:
      Mon Oct 22, 2018 4:12 pm
      mmnj wrote:
      Mon Oct 22, 2018 3:58 pm
      Dottie57 wrote:
      Mon Oct 22, 2018 3:53 pm
      401k - Best bond fund offered. Dodge and Cox Income. Also Stable Value Fund.
      Roth - no bonds
      trad IRA - total bond at fidelity plus 3 Cds
      Bank -3 Cds

      All Cds bought this year and need 2 more setup.

      CD ladder to SS. Then less needed.
      How many years to retirement?
      Retired this year. 1 year of severance, so I start spending from retirement next next year.
      Congratulations on your retirement! Also explains why you have CDs lined up.

      mmnj
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      Joined: Tue Jul 17, 2018 12:10 pm

      Re: What's Your Fixed Income Strategy?

      Post by mmnj » Mon Oct 22, 2018 6:56 pm

      Rob54keep wrote:
      Mon Oct 22, 2018 4:40 pm
      In retirement now for 3 years (retired at 60). AA 40/60. Bond Allocation is split between Total Bond Index, Short Term Investment Grade, CD-ladder, some I-Bonds and a Stable Value Fund (from a previous 401k).

      Currently withdrawing monthly from the Stable value (has highest expense ratio of 0.28). This will take me to social security at age 68?-70?. I also take dividends (and do tax withholding) from the short-term investment grade to manage yearly tax payments. I may never use the stock funds but have been doing partial Roth conversions with taxes in mind between age 60-70.
      Did you always have your Total Bond Index, Short Term Investment Grade, CD-ladder and I-Bonds as part of your allocation or did you reallocate to them when you retired?

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      GerryL
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      Re: What's Your Fixed Income Strategy?

      Post by GerryL » Mon Oct 22, 2018 7:24 pm

      Years to retirement or already in retirement?(how many years in?): 4 years in.
      Fixed income allocation as part of total allocation (Equity/Fixed Income) 60/40
      Allocation within the fixed income allocation (Bond funds, CDs, Money Market, etc..) Bond index funds. I maintain a stash of cash in bank and MM that I can tap as needed, but don't count that as part of AA. Used CDs during first 4 years. May do so again to build up cash for a large purchase.
      What's your Philosophy? 1) Live modestly. 2) Save like crazy. 3) Enjoy my good fortune.
      What's your Strategy? Live off cash savings/severance/taxable dividends and tiny pension until SS. (Just got my 1st SS payment last week!) When RMDs start next year, put some into cash to cover any gap in spending and QCD/invest the rest.

      Dave55
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      Re: What's Your Fixed Income Strategy?

      Post by Dave55 » Mon Oct 22, 2018 7:42 pm

      mmnj wrote:
      Mon Oct 22, 2018 2:27 pm
      There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
        Years to retirement or already in retirement?(how many years in?) retired, 8 years in
        Fixed income allocation as part of total allocation (Equity/Fixed Income) 70% Fixed
        Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..) Intermediate Muni 40%, Intermediate Investment Grade 20%, Total Bond 35% MM 5%
        What's your Philosophy? Safety, low cost
        What's your Strategy? keep it simple, minimize taxes in taxable



        Dave

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        nisiprius
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        Re: What's Your Fixed Income Strategy?

        Post by nisiprius » Mon Oct 22, 2018 8:08 pm

        Years to retirement or already in retirement? In retirement.
        Fixed income allocation as part of total allocation? Conservative.
        Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
        --Vanguard Total Bond Market Index Fund, VBTLX, 40%
        --Vanguard Inflation-Protected Securities Fund, VAIPX, 40%
        --United States Savings Bonds, Series I: 20%

        What's your Philosophy? Eh, a better choice than cash because of higher return and inflation protection on some of it, and the extra risk beyond cash will be all but invisible in a portfolio that has a meaningful stock allocation.

        What's your Strategy? Eh, it's good enough, so leave it alone, don't monkey with it.
        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.

        UpperNwGuy
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        Re: What's Your Fixed Income Strategy?

        Post by UpperNwGuy » Mon Oct 22, 2018 8:50 pm

        My strategy is to split my fixed income investments 50/50 between Total Bond and Intermediate-Term Tax-Exempt, both in taxable.

        Random Walker
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        Joined: Fri Feb 23, 2007 8:21 pm

        Re: What's Your Fixed Income Strategy?

        Post by Random Walker » Mon Oct 22, 2018 8:59 pm

        mmnj wrote:
        Mon Oct 22, 2018 6:51 pm
        Random Walker wrote:
        Mon Oct 22, 2018 4:10 pm
        I’m 55 years old. My philosophy is that bonds are for safety: to dampen overall portfolio volatility to somewhat tolerable level. I take all my risk on the equity side. Therefore my bonds are all high quality and short to intermediate term. I use high grade municipal in a taxable account with average maturity 5-6 years. My asset allocation is 40% equities heavily tilted to size and value, 24% tax inefficient alternatives, 36% muni bonds. At the very short end of my bond ladder I have CDs. I believe the after tax yields on 1-3 year CDs generally better than short bonds.

        Dave
        Are you retired? That would explain 40/60 at age 55.
        No not retired. I view my employment as a bit shaky, so not exactly sure when retirement will hit. I’d like to work another 10 years if possible. The 40% equities is related to the following:
        1. Fear of loss/ pain of loss way greater than happiness from equal sized gain for me
        2. If things go well and I wish, maybe increase equities in future. I have sort of partially secured a semi retirement floor with the bonds over last few years
        3. Big tilt to SV and half equities Int increases the expected return of my equities
        4. I expect pretax equity like returns from the alternatives
        5. I’ve been surprised at my Monte Carlo Simulation results (and I think others would be at their own as well). There was a surprising lack of sensitivity of meeting my goals to equity allocation. My goals have gotten more modest over time.

        Dave
        Last edited by Random Walker on Mon Oct 22, 2018 9:47 pm, edited 1 time in total.

        darrvao777
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        Re: What's Your Fixed Income Strategy?

        Post by darrvao777 » Mon Oct 22, 2018 9:16 pm

        Years to retirement or already in retirement?(how many years in?)

        Hopefully 30+ yrs

        Fixed income allocation as part of total allocation (Equity/Fixed Income)

        2/3 equity, 1/3 fixed income

        Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)

        I have some TBM and some cash but the vast majority is intermediate term muni fund

        What's your Philosophy?

        Keep it simple, 1/3 domestic equity, 1/3 international equity, 1/3 intermediate term munis. (I’m in the highest tax bracket and don’t have a lot of tax deferred space so the majority of my net worth is in a taxable account)

        What's your Strategy?

        Earn a lot, spend a little, invest using the plan above, repeat until I hit 70. I should be just fine financially.

        Dandy
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        Re: What's Your Fixed Income Strategy?

        Post by Dandy » Mon Oct 22, 2018 9:44 pm

        Years to retirement or already in retirement?(how many years in?)
        Age 70 ten years into retirement.

        Fixed income allocation as part of total allocation (Equity/Fixed Income)
        43/57

        Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
        17% Principal Safe (e.g.CDs, Savings, Money Mkt), 17% Short Term bond Funds, 23% Intermediate Bond Funds).

        What's your Philosophy?
        Roughly follow Dr. Berstein's idea of having 20+ years worth of drawdown "safe" for me that is assets in Principal Safe and Short Term Bond funds.

        What's your Strategy?
        Asset Preservation vs Growth. While I have "safe" assets covering 20 years worth of drawdown I plan to take withdrawals from "safe" and "risk" asset when risk assets do well. Not overly focused on whether "safe" assets are Principal Safe or Short Term bonds.

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        nedsaid
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        Re: What's Your Fixed Income Strategy?

        Post by nedsaid » Mon Oct 22, 2018 10:41 pm

        I invest in Investment Grade, Intermediate Term Bond funds. Also include some TIPS and a bit of International Bonds. I have very little high yield "junk" in my portfolio.
        A fool and his money are good for business.

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        Rob54keep
        Posts: 342
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        Re: What's Your Fixed Income Strategy?

        Post by Rob54keep » Tue Oct 23, 2018 6:42 am

        mmnj wrote:
        Mon Oct 22, 2018 6:56 pm
        Rob54keep wrote:
        Mon Oct 22, 2018 4:40 pm
        In retirement now for 3 years (retired at 60). AA 40/60. Bond Allocation is split between Total Bond Index, Short Term Investment Grade, CD-ladder, some I-Bonds and a Stable Value Fund (from a previous 401k).

        Currently withdrawing monthly from the Stable value (has highest expense ratio of 0.28). This will take me to social security at age 68?-70?. I also take dividends (and do tax withholding) from the short-term investment grade to manage yearly tax payments. I may never use the stock funds but have been doing partial Roth conversions with taxes in mind between age 60-70.
        Did you always have your Total Bond Index, Short Term Investment Grade, CD-ladder and I-Bonds as part of your allocation or did you reallocate to them when you retired?
        The weighted average duration of my bond portfolio has decreased (now 4.5 years) as I approached retirement. I eliminated my company stock allocation when I was within 5 years of retirement and moved it into the Stable Value Fund. I wanted to ensure I had enough "safe" short-term reserves to get me to social security age. It also eliminated sequence of return risk when I retired. My other stock funds are the growth engine of my portfolio and I have rebalanced according to my Investment Policy Statement.

        So when I retired, I added the CD-ladder, the Short Term Investment Grade and increased the amount in the Stable Fund. The I-Bonds I have held for some time now.
        Last edited by Rob54keep on Tue Oct 23, 2018 9:12 am, edited 2 times in total.

        Faith20879
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        Re: What's Your Fixed Income Strategy?

        Post by Faith20879 » Tue Oct 23, 2018 8:59 am

        1-2 years to retirement
        SS is still a way off so not included here.

        I figure our fixed income (covers about 70% of our expenses) comes from these resources:
        10% Pension
        20% Savings Bond
        40% Total Bond (401K) and Muni Bond (Taxable).
        Last edited by Faith20879 on Tue Oct 23, 2018 9:36 am, edited 1 time in total.

        mmnj
        Posts: 17
        Joined: Tue Jul 17, 2018 12:10 pm

        Re: What's Your Fixed Income Strategy?

        Post by mmnj » Tue Oct 23, 2018 9:22 am

        Dandy wrote:
        Mon Oct 22, 2018 9:44 pm
        Years to retirement or already in retirement?(how many years in?)
        Age 70 ten years into retirement.

        Fixed income allocation as part of total allocation (Equity/Fixed Income)
        43/57

        Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
        17% Principal Safe (e.g.CDs, Savings, Money Mkt), 17% Short Term bond Funds, 23% Intermediate Bond Funds).

        What's your Philosophy?
        Roughly follow Dr. Berstein's idea of having 20+ years worth of drawdown "safe" for me that is assets in Principal Safe and Short Term Bond funds.

        What's your Strategy?
        Asset Preservation vs Growth. While I have "safe" assets covering 20 years worth of drawdown I plan to take withdrawals from "safe" and "risk" asset when risk assets do well. Not overly focused on whether "safe" assets are Principal Safe or Short Term bonds.
        Did you always have Principal Safe/Short Term Bond/Intermediate Bond or did you transition into this allocation from something else? if so, what was your decision point?

        Bacchus01
        Posts: 1944
        Joined: Mon Dec 24, 2012 9:35 pm

        Re: What's Your Fixed Income Strategy?

        Post by Bacchus01 » Tue Oct 23, 2018 9:30 am

        mmnj wrote:
        Mon Oct 22, 2018 2:27 pm
        There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
          Years to retirement or already in retirement?(how many years in?)
          Fixed income allocation as part of total allocation (Equity/Fixed Income)
          Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
          What's your Philosophy?
          What's your Strategy?
          5-10 years from retirement
          About .5% in fixed income (money market)
          Philosophy? No fixed income
          Strategy? I and my wife have two pensions that will draw about $65K/yr. IF SS lives, that's probably another $45K/yr. With kids gone, we should easily be able to live on our current nest egg if it dropped in half plus the pension/SS. I prefer to be heavily invested.

          mmnj
          Posts: 17
          Joined: Tue Jul 17, 2018 12:10 pm

          Re: What's Your Fixed Income Strategy?

          Post by mmnj » Tue Oct 23, 2018 9:38 am

          Rob54keep wrote:
          Tue Oct 23, 2018 6:42 am
          mmnj wrote:
          Mon Oct 22, 2018 6:56 pm
          Rob54keep wrote:
          Mon Oct 22, 2018 4:40 pm
          In retirement now for 3 years (retired at 60). AA 40/60. Bond Allocation is split between Total Bond Index, Short Term Investment Grade, CD-ladder, some I-Bonds and a Stable Value Fund (from a previous 401k).

          Currently withdrawing monthly from the Stable value (has highest expense ratio of 0.28). This will take me to social security at age 68?-70?. I also take dividends (and do tax withholding) from the short-term investment grade to manage yearly tax payments. I may never use the stock funds but have been doing partial Roth conversions with taxes in mind between age 60-70.
          Did you always have your Total Bond Index, Short Term Investment Grade, CD-ladder and I-Bonds as part of your allocation or did you reallocate to them when you retired?
          The weighted average duration of my bond portfolio has decreased (now 4.5 years) as I approached retirement. I eliminated my company stock allocation when I was within 5 years of retirement and moved it into the Stable Value Fund. I wanted to ensure I had enough "safe" short-term reserves to get me to social security age. It also eliminated sequence of return risk when I retired. My other stock funds are the growth engine of my portfolio and I have rebalanced according to my Investment Policy Statement.

          So when I retired, I added the CD-ladder, the Short Term Investment Grade and increased the amount in the Stable Fund. The I-Bonds I have held for some time now.
          Thanks - key takeaway for me is that you eliminated sequence of return risk when you retired by adding the CD-ladder, Short Term Investment Grade and I-Bonds. Is the Stable value Fund a Bond Fund?

          Dandy
          Posts: 5418
          Joined: Sun Apr 25, 2010 7:42 pm

          Re: What's Your Fixed Income Strategy?

          Post by Dandy » Tue Oct 23, 2018 10:52 am

          D
          id you always have Principal Safe/Short Term Bond/Intermediate Bond or did you transition into this allocation from something else? if so, what was your decision point?
          For much of my career I had access to a Stable Value Fund which at one time paid 11% but got down to about 5%. So, I didn't have to fuss much with fixed income allocation. When I retired in 2008 at age 60 I felt i had enough but then the market dropped to where I wasn't sure. I couldn't really decide what overall allocation made sense e.g. was 60/40 too aggressive? Was 40/60 to conservative? Was 50/50 just right?

          I read Dr. Wm Bernstein's idea of having enough "safe" products for 20-25 years worth of drawdown dollars - and the rest invest any way you want even 100% stocks. That idea of securing your retirement funding first, then deciding on how to allocate the rest made sense to me. I didn't want to get into individual TIPS ladder but decided what I considered "safe" to be FDIC products and short term bond funds. I had a large fixed income portfolio and decided a few years ago to implement "bottom" up plan a la Dr. Bernstein. I already had a lot of FDIC products as part of my funding to collect SS at age 70 (this year). So, with interest rates rising I felt a rough 50/50 split between Principal Safe and short term bond funds was about right. Not looking for this part of my overall portfolio for growth so Principal Safe slight "growth" would basically offset Short Term bond fund slight dips.

          The result of this change was peace of mind/sleep well. My "risk" portfolio is 67/33 and overall I am at 43/57. But it is how I got to that that was important i.e. bottom up vs educated guess. I may not have to stay with this very conservative overall fixed income approach, but for now I'm happy. Keeping my "safe" portfolio funding to age 90 takes priority over my overall allocation. It has also made us more comfortable in gifting "early" inheritance to our 2 children so they can enjoy life more while their need is greater and we are alive.

          Finally?, when I collected SS at age 70 this year my drawdown dollars decreased but I realized if I die first my wife will lose half my pension, her SS (which is lower), and be filing single instead of joint, etc. So, I decided, for now, to stay my course.

          User avatar
          Rob54keep
          Posts: 342
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          Re: What's Your Fixed Income Strategy?

          Post by Rob54keep » Tue Oct 23, 2018 10:58 am

          mmnj wrote:
          Tue Oct 23, 2018 9:38 am
          Rob54keep wrote:
          Tue Oct 23, 2018 6:42 am
          mmnj wrote:
          Mon Oct 22, 2018 6:56 pm
          Rob54keep wrote:
          Mon Oct 22, 2018 4:40 pm
          In retirement now for 3 years (retired at 60). AA 40/60. Bond Allocation is split between Total Bond Index, Short Term Investment Grade, CD-ladder, some I-Bonds and a Stable Value Fund (from a previous 401k).

          Currently withdrawing monthly from the Stable value (has highest expense ratio of 0.28). This will take me to social security at age 68?-70?. I also take dividends (and do tax withholding) from the short-term investment grade to manage yearly tax payments. I may never use the stock funds but have been doing partial Roth conversions with taxes in mind between age 60-70.
          Did you always have your Total Bond Index, Short Term Investment Grade, CD-ladder and I-Bonds as part of your allocation or did you reallocate to them when you retired?
          The weighted average duration of my bond portfolio has decreased (now 4.5 years) as I approached retirement. I eliminated my company stock allocation when I was within 5 years of retirement and moved it into the Stable Value Fund. I wanted to ensure I had enough "safe" short-term reserves to get me to social security age. It also eliminated sequence of return risk when I retired. My other stock funds are the growth engine of my portfolio and I have rebalanced according to my Investment Policy Statement.

          So when I retired, I added the CD-ladder, the Short Term Investment Grade and increased the amount in the Stable Fund. The I-Bonds I have held for some time now.
          Thanks - key takeaway for me is that you eliminated sequence of return risk when you retired by adding the CD-ladder, Short Term Investment Grade and I-Bonds. Is the Stable value Fund a Bond Fund?
          Yes the Stable Value Fund is a bond fund with a duration of about 2.5 years. These type of funds are only found in some 401k's, is my understanding.

          mmnj
          Posts: 17
          Joined: Tue Jul 17, 2018 12:10 pm

          Re: What's Your Fixed Income Strategy?

          Post by mmnj » Tue Oct 23, 2018 11:09 am

          Dandy wrote:
          Tue Oct 23, 2018 10:52 am
          D
          id you always have Principal Safe/Short Term Bond/Intermediate Bond or did you transition into this allocation from something else? if so, what was your decision point?
          For much of my career I had access to a Stable Value Fund which at one time paid 11% but got down to about 5%. So, I didn't have to fuss much with fixed income allocation. When I retired in 2008 at age 60 I felt i had enough but then the market dropped to where I wasn't sure. I couldn't really decide what overall allocation made sense e.g. was 60/40 too aggressive? Was 40/60 to conservative? Was 50/50 just right?

          I read Dr. Wm Bernstein's idea of having enough "safe" products for 20-25 years worth of drawdown dollars - and the rest invest any way you want even 100% stocks. That idea of securing your retirement funding first, then deciding on how to allocate the rest made sense to me. I didn't want to get into individual TIPS ladder but decided what I considered "safe" to be FDIC products and short term bond funds. I had a large fixed income portfolio and decided a few years ago to implement "bottom" up plan a la Dr. Bernstein. I already had a lot of FDIC products as part of my funding to collect SS at age 70 (this year). So, with interest rates rising I felt a rough 50/50 split between Principal Safe and short term bond funds was about right. Not looking for this part of my overall portfolio for growth so Principal Safe slight "growth" would basically offset Short Term bond fund slight dips.

          The result of this change was peace of mind/sleep well. My "risk" portfolio is 67/33 and overall I am at 43/57. But it is how I got to that that was important i.e. bottom up vs educated guess. I may not have to stay with this very conservative overall fixed income approach, but for now I'm happy. Keeping my "safe" portfolio funding to age 90 takes priority over my overall allocation. It has also made us more comfortable in gifting "early" inheritance to our 2 children so they can enjoy life more while their need is greater and we are alive.

          Finally?, when I collected SS at age 70 this year my drawdown dollars decreased but I realized if I die first my wife will lose half my pension, her SS (which is lower), and be filing single instead of joint, etc. So, I decided, for now, to stay my course.
          Thanks for sharing your thought process (Strategy) - very helpful. I had this simplified view that if I started with a 3/4 fund portfolio I'd draw down Total Bond Fund in my retirement years but what I have seen is that a good number of Bogleheads have a nuanced approach when it comes to their Fixed Income portion of their allocation either close or in their retirement years. The approach may not be as simple, but neither is it overly complicated so it is worth my consideration.

          User avatar
          sgr000
          Posts: 354
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          Re: What's Your Fixed Income Strategy?

          Post by sgr000 » Tue Oct 23, 2018 11:52 am

          • Years to retirement: 0-2yr. Was closer, before the market decline of the last couple weeks. :-(
          • Allocation: Stock/bond ratio 60/40, domestic/international stock ratio also 60/40, with small & value tilts and a frisson of REITs. All index funds. Will likely keep this allocation until my spouse & I are in our mid-70s; might consider going 50/50 in early retirement to mitigate sequence of returns risk.
          • Fixed income allocation: Equal parts short bond index (VBIRX), intermediate bond index (VBILX), short TIPS index (VTAPX), and international bond index (VTABX).
          • Philosophy: That it's a category error for me to think that I have a philosophy about fixed income. :)
          • Strategy: Mostly leave it alone, except for rebalancing, integrating the eventual 401(k) rollover, and periodic Roth conversions.
            • It's got some international & some domestic.
            • It's got some nominal and some inflation-protected.
            • It's got some short, and some intermediate term.
            Briefly, it's already got some of everything in the bond market that I would actually use (e.g., I won't use long-term bonds, mortgage-backed securities, junk bonds, preferreds, cash, etc. -- so they don't really matter to me). I might consider changing VBIRX & VBILX to short & intermediate treasury index funds (VFIRX & VSIGX), since the general market has some corporate bonds that have at least a bit of stock-like risk... but that's probably a minor effect.
          Perhaps one day in the future, to guard against cognitive decline, I'll just throw the whole thing into Lifestrategy Moderate Growth (VSMGX) and be done with it. For now, though, there's the complication of fund placement (taxable, Trad, and Roth accounts, and the conversions between them).
          Last edited by sgr000 on Tue Oct 23, 2018 12:10 pm, edited 1 time in total.

          Always passive
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          Location: Israel

          Re: What's Your Fixed Income Strategy?

          Post by Always passive » Tue Oct 23, 2018 12:04 pm

          Retired
          70% Fixed Income
          30% Equities
          Fixed Income Allocation: 10 year TIPS ladder; rest in short term (2 years duration) bond ETF.
          Once the FED stabilized rates (2019,2020), I will increase the bond duration to intermediate (5-7 years)

          User avatar
          galeno
          Posts: 1370
          Joined: Fri Dec 21, 2007 12:06 pm

          Re: What's Your Fixed Income Strategy?

          Post by galeno » Tue Oct 23, 2018 12:17 pm

          Retired

          60% Fixed Income

          40% Equities

          Fixed Income Allocation: 33% Int Term US Treas + 33% US Corp + 25% TIPS + 9% CASH

          Philosophy: Avoid currency risk and associated volatility by using only USD denominated USA bonds. Ignore duration risk by holding for more than the duration. Protect a bit against unexpected inflation with TIPS. Reach for yield a bit with corporate bonds. Provide a bit of ballast with US treasuries. CASH for convenience.
          AA = 40/55/5. Expected CAGR = 3.8%. GSD (5y) = 6.2%. USD inflation (10 y) = 1.8%. AWR = 4.0%. TER = 0.4%. Port Yield = 2.82%. Term = 33 yr. FI Duration = 6.0 yr. Portfolio survival probability = 95%.

          ThrustVectoring
          Posts: 537
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          Re: What's Your Fixed Income Strategy?

          Post by ThrustVectoring » Tue Oct 23, 2018 12:42 pm

          • Years to retirement or already in retirement?(how many years in?) - near start of accumulation phase, <10 years of annual expenses saved so not even thinking about putting up a retirement date.
          • Fixed income allocation as part of total allocation (Equity/Fixed Income) - 100% equity plus cash emergency fund of two month's income.
          • Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..) - Rewards checking account @ 2% interest. There's ways to get slightly more interest here, but since a basis point is only worth a dollar per year, yield chasing isn't worth the additional complexity IMHO.
          • What's your Philosophy? - In expectation, the cheapest price to purchase a tiny slice of the total economy is today's. Maintain enough cash to deal with any life things, and throw the rest at stock index funds for now.
          • What's your Strategy? - Accumulate 30+ times annual expenses and retire. 18+ years worth in stock market index funds, 2 in cash, 10 in a ten-year TIPS ladder. Don't roll the ladder once retired, instead letting stock market growth push my stock allocation way up. I might change my mind on actually retiring if I'm still having fun working, and instead of the TIPS ladder just wind up accumulating far more money than I could ever spend.
          Current portfolio: 60% VTI / 40% VXUS

          Broken Man 1999
          Posts: 1530
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          Re: What's Your Fixed Income Strategy?

          Post by Broken Man 1999 » Tue Oct 23, 2018 2:54 pm

          mmnj wrote:
          Mon Oct 22, 2018 2:27 pm
          There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
            Years to retirement or already in retirement?(how many years in?)
            Retired since 2015. Age 65, DW age 65.
            Fixed income allocation as part of total allocation (Equity/Fixed Income)
            Equities 49%
            Bonds 49%
            Cash/near cash 2%

            Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
            Total Bond Index, Short-term Treasury Index, Intermediate-term Treasury Index, Series I US Savings Bonds. Federal Money Market
            What's your Philosophy?
            Take risk in equity holdings, strong preference for US government debt in bond portion. Also open to factor investing opportunities.
            What's your Strategy?
            Keep large portion of portfolio (45%-55%) in high quality bonds/bond funds, CDs. Stay fully invested, steady eye on expenses to prevent lifestyle creep during "flush" times.
            Broken Man 1999
            “If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

            mmnj
            Posts: 17
            Joined: Tue Jul 17, 2018 12:10 pm

            Re: What's Your Fixed Income Strategy?

            Post by mmnj » Tue Oct 23, 2018 3:00 pm

            Broken Man 1999 wrote:
            Tue Oct 23, 2018 2:54 pm
            mmnj wrote:
            Mon Oct 22, 2018 2:27 pm
            There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
              Years to retirement or already in retirement?(how many years in?)
              Retired since 2015. Age 65, DW age 65.
              Fixed income allocation as part of total allocation (Equity/Fixed Income)
              Equities 49%
              Bonds 49%
              Cash/near cash 2%

              Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
              Total Bond Index, Short-term Treasury Index, Intermediate-term Treasury Index, Series I US Savings Bonds. Federal Money Market
              What's your Philosophy?
              Take risk in equity holdings, strong preference for US government debt in bond portion. Also open to factor investing opportunities.
              What's your Strategy?
              Keep large portion of portfolio (45%-55%) in high quality bonds/bond funds, CDs. Stay fully invested, steady eye on expenses to prevent lifestyle creep during "flush" times.
              Broken Man 1999
              Did you transition into the Bond and Treasury Index funds over time or did you always have this AA?

              3funder
              Posts: 762
              Joined: Sun Oct 15, 2017 9:35 pm

              Re: What's Your Fixed Income Strategy?

              Post by 3funder » Tue Oct 23, 2018 3:01 pm

              Total Bond. Makes for an easy decision.

              Ron Scott
              Posts: 1090
              Joined: Tue Apr 05, 2016 5:38 am

              Re: What's Your Fixed Income Strategy?

              Post by Ron Scott » Tue Oct 23, 2018 3:14 pm

              1.5 years in retirement
              40-60
              50% munis in taxable, 30% TBM in IRA, 13% CD/MM, 7% RE (rentals)
              Keep equities forever and don’t rebalance. Predicting returns is not possible.
              Predict higher tax rates in 3-7 years; so Roth convert. Otherwise do not manufacture taxable income.
              Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

              Broken Man 1999
              Posts: 1530
              Joined: Wed Apr 08, 2015 11:31 am

              Re: What's Your Fixed Income Strategy?

              Post by Broken Man 1999 » Tue Oct 23, 2018 3:23 pm

              mmnj wrote:
              Tue Oct 23, 2018 3:00 pm
              Broken Man 1999 wrote:
              Tue Oct 23, 2018 2:54 pm
              mmnj wrote:
              Mon Oct 22, 2018 2:27 pm
              There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
                Years to retirement or already in retirement?(how many years in?)
                Retired since 2015. Age 65, DW age 65.
                Fixed income allocation as part of total allocation (Equity/Fixed Income)
                Equities 49%
                Bonds 49%
                Cash/near cash 2%

                Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
                Total Bond Index, Short-term Treasury Index, Intermediate-term Treasury Index, Series I US Savings Bonds. Federal Money Market
                What's your Philosophy?
                Take risk in equity holdings, strong preference for US government debt in bond portion. Also open to factor investing opportunities.
                What's your Strategy?
                Keep large portion of portfolio (45%-55%) in high quality bonds/bond funds, CDs. Stay fully invested, steady eye on expenses to prevent lifestyle creep during "flush" times.
                Broken Man 1999
                Did you transition into the Bond and Treasury Index funds over time or did you always have this AA?
                I had equity heavy portfolio until a few years ago. I used portion of my lump sum retirement to buy bonds/bond funds. So I never actually sold equities to buy bonds. With my lump sum I bought bond funds, and equity funds, but more bonds than equities.

                Broken Man 1999
                “If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

                hdas
                Posts: 329
                Joined: Thu Jun 11, 2015 8:24 am

                Re: What's Your Fixed Income Strategy?

                Post by hdas » Wed Oct 24, 2018 6:35 am

                Years to retirement: Uncertain, some say I'm retired, I would say at least 30 years away.
                Fixed income allocation as part of total allocation: 20% (This is exclusively the retirement portion of my portfolio). In other speculative accounts I also hold emerging market CD's.
                Allocation within the the fixed income allocation: Given lack of flexibility in funds in tax deferred accounts right now the mix is 10% Total US Bond, 5% Corporate Intermediate, 5% Emerging Market Bonds.
                What's your Philosophy?: Slice and Dice, "Adaptive" :twisted:
                What's your Strategy?
                - I change duration and credit quality according to the opportunity set of the moment.
                - Once I have the flexibility I will add International Bonds (BNDX) when they sell off a bit and replace Total Bond with Long Term Nominal US Bonds (EDV or TLT)
                - I Also keep 1 year of expenses in short term T-Bills , MM Funds, CD's.
                - At some point perhaps will include TIPS and If when my allocation to fixed income becomes a bigger portion, say 40%....will look into more involved strategies.

                User avatar
                TomatoTomahto
                Posts: 7669
                Joined: Mon Apr 11, 2011 1:48 pm

                Re: What's Your Fixed Income Strategy?

                Post by TomatoTomahto » Wed Oct 24, 2018 7:15 am

                Years to retirement or already in retirement?(how many years in?) I am retired (duration is a matter of definition; I was a stay at home dad for a long time; at some point the kids moved away to college and jobs, so I guess they retired me). My wife is possibly 5 years from retiring; she could change her mind and retire today, she might work into her 70s, but my best guess is 5 years.

                Fixed income allocation as part of total allocation (Equity/Fixed Income)Sort of a Liability Matching Portfolio (LMP). $3M in various fixed income. I’d rather not say what the equity percentage is (other than it’s “sufficient”). I no longer closely track it, but anything outside the fixed income portion goes to TSM, TISM, and what we’re allowed to put into PRIMECAP.

                Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)Mostly TBM, some Stable Value, some odds and sods in I Bonds.

                What's your Philosophy?Don’t overthink it; thinking is not my long suit.

                What's your Strategy?Don’t fiddle too much. Just stay the course.
                Last edited by TomatoTomahto on Wed Oct 24, 2018 7:17 am, edited 2 times in total.
                Zero Net Carbon by 2019.

                B. Wellington
                Posts: 136
                Joined: Fri Mar 30, 2012 10:10 am

                Re: What's Your Fixed Income Strategy?

                Post by B. Wellington » Wed Oct 24, 2018 7:15 am

                mmnj wrote:
                Mon Oct 22, 2018 2:27 pm
                There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
                  Years to retirement or already in retirement?(how many years in?)
                  Fixed income allocation as part of total allocation (Equity/Fixed Income)
                  Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
                  What's your Philosophy?
                  What's your Strategy?
                  3-4 years from "early retirement"

                  Target Allocation 60/40. Balanced Index with a mix of Wellington/Wellesley we bought many years ago.

                  Keep It Simple....( Conservative investing following Bogle, Peter Bernstein, (The 60/40 solution.) Among others.

                  Dividends followed by sales of funds each year for expenses. Basic 4% WR with flexibility to lower that when needed.

                  MikeG62
                  Posts: 1185
                  Joined: Tue Nov 15, 2016 3:20 pm
                  Location: New Jersey

                  Re: What's Your Fixed Income Strategy?

                  Post by MikeG62 » Wed Oct 24, 2018 8:16 am

                  mmnj wrote:
                  Mon Oct 22, 2018 2:27 pm
                  There are a lot of great threads and posts about specific Bond and/or CD topics that helpful Bogleheads respond to, but I'm interested in your Philosophy and Strategy (two of three of Rick Ferri's attributes in investing) when it comes to the fixed income portion of your AA, especially folks 5 years away or already in retirement. Can you share:
                    Years to retirement or already in retirement?(how many years in?)
                    Fixed income allocation as part of total allocation (Equity/Fixed Income)
                    Allocation within the the fixed income allocation (Bond funds, CDs, Money Market, etc..)
                    What's your Philosophy?
                    What's your Strategy?
                    Retired for three years now (I am 56 and DW 53).
                    Target AA is 48% Equities, 48% Fixed Income and 4% cash.
                    Most of fixed income is in individual muni bonds in taxable account (do have bond fund in tax deferred as well)
                    Have been a buyer of individual muni's since around the time of the dot com crash. I get them through a reliable source.
                    Keeping most of FI in muni's allows us to Roth convert more of our t-IRA to our Roth.
                    Real Knowledge Comes Only From Experience

                    User avatar
                    Sandtrap
                    Posts: 5379
                    Joined: Sat Nov 26, 2016 6:32 pm
                    Location: Hawaii😀 Northern AZ.😳 Retired.

                    Re: What's Your Fixed Income Strategy?

                    Post by Sandtrap » Wed Oct 24, 2018 8:27 am

                    1. Average duration of portfolio bond fonds = "Z"

                    2. "Z" diversified to CD Ladder, Short/Mid Term Treasuries, etc.

                    Why?

                    To my "simple mind", diversification of fixed this way allows it to "ride out" bond fond fluctuations over the average duration.
                    And, it seems like a simple way to accomplish this.

                    User avatar
                    Earl Lemongrab
                    Posts: 5700
                    Joined: Tue Jun 10, 2014 1:14 am

                    Re: What's Your Fixed Income Strategy?

                    Post by Earl Lemongrab » Wed Oct 24, 2018 2:26 pm

                    I retired in January. I have a pension, so currently I am not withdrawing. My fixed income is 40% of portfolio, the same as it has been for the past few years. That is all in the 401(k), split 50/50 between bond index and stable value (currently paying about 2.65%).
                    This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

                    User avatar
                    sergeant
                    Posts: 934
                    Joined: Tue Dec 04, 2007 11:13 pm

                    Re: What's Your Fixed Income Strategy?

                    Post by sergeant » Wed Oct 24, 2018 3:00 pm

                    I retired a couple years ago. DW will be retiring late next year.
                    My 2% COLA pension provides 3X our minimum funding level.
                    DW 2% COLA will provide 1X our minimum funding level.
                    We are still adding to our investments through DW's deferred comp, Roth IRA's, taxable accounts
                    We have 24+ years of expenses in FI.
                    Our desired AA is 50/50 but over the past 12 months we lowered equities % and are at 35/65.
                    FI is in our stable value funds, Prime MM, and a CD.
                    Lincoln 3 EOW!

                    curmudgeon
                    Posts: 1631
                    Joined: Thu Jun 20, 2013 11:00 pm

                    Re: What's Your Fixed Income Strategy?

                    Post by curmudgeon » Wed Oct 24, 2018 6:57 pm

                    Retired about two years now. General strategy is to use FI to substitute for our SS benefits until we claim (probably at age 70). Everything else is in equities. This puts us at 85/15 AA now, and likely drifting back to maybe 95/5 over the next 10 years. FI is all in taxable, because that is what we are spending from now.

                    The FI is a mixture of CDs, individual shortish bonds, ultra-short bond funds, MM. With the current state of interest rates, I don't have anything like a specific ladder set up (everything is two years or under), though I may review that in another year or so (or when the Fed balance sheet is back to normal) and add more duration then.

                    This is somewhat driven by the reality that we've probably "over-saved" relative to our spending inclinations, and so we might be considered as partly investing for our heirs.

                    hudson
                    Posts: 1515
                    Joined: Fri Apr 06, 2007 9:15 am

                    Re: What's Your Fixed Income Strategy?

                    Post by hudson » Thu Oct 25, 2018 12:13 pm

                    Dandy wrote:
                    Tue Oct 23, 2018 10:52 am

                    I read Dr. Wm Bernstein's idea of having enough "safe" products for 20-25 years worth of drawdown dollars - and the rest invest any way you want even 100% stocks. That idea of securing your retirement funding first, then deciding on how to allocate the rest made sense to me.
                    I vote for the above.

                    I like the idea of having safe fixed income products like CDs or funds that are Vanguard Risk Potential 2 or better.

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