On the other hand, the longer duration TIPS fund exposes a retiree to more liquidity risk and term risk. What matters is not the particular fund(s) as the duration of the combined portfolio.vineviz wrote: ↑Wed Jul 22, 2020 7:54 amThis approach also exposes the investor to considerably more interest rate risk.Elysium wrote: ↑Wed Jul 22, 2020 7:00 am If you must hold TIPS fund, then at that age I would consider Vanguard Short Term TIPS fund instead of interm-term or longer. They will have lower returns but will closely match inflation, and given current real yields you can expect them to return inflation matching, which is why you would own TIPS anyway, and the real returns is a bonus which unfortunately we do not have at this time. This will meet your spending needs in near term without worrying about losing to inflation. Not so great may be, but not so bad either.
It essentially amounts to a speculative bet that real interest rates will go up from here: accepting a lower real yield now in hope for higher real yields later on. Whether such market speculation is desirable or not is up to the investor, but I think it's important to understand that the bet is being placed.
The main problem with a TIPS ladder is the difficulty in building it because of the limited maturities available. If you have an 10-year rolling ladder to cover 30 years of expenses then the duration is about 5.5 years and the reinvestment risk from falling rates is not particularly different from an intermediate TIPS fund.