Talk me out if this…I am thinking of locking up a decent chunk of my bond allocation in l-t treasuries

[theflower]

So I early retired. Using models both by Fidelity and an advisor (I don’t use anymore) my bond portion needs to earn 4% or so to not have to get a job at Walmart at age 85. Why shouldn’t I lock it up in treasuries since the yields are above 4%. I assume reinvestment risk is an issue but what else?

 

[soccersw2]

@theflower I’d worry about inflation given the US government’s finances. You could end up earning dollars that don’t buy much.

 

[aygo]

@soccersw2 Long term TIPS then?

 

[soccersw2]

@aygo I think that would work.

 

[matt1111]

@aygo From my understanding tips have not done well during recent inflationary era, although future could be different. I don’t know if there is any sure fire way to ensure a real yield. Whether you go with treasuries, i bonds, tips, CD’s, etc. you’re forced to make some type of a gamble. A little of everything would be nice but that becomes difficult to manage.

 

[pauledwardmorgan]

@theflower Some fixed income for retirement out to age 90 (or more?) seems prudent, to me. TIPS used in a retirement account is getting a lot of attention lately. But TIPS/fixed income only for part of a portfolio (you determine how much). TIPS are "inflation protected income". Social Security is also "inflation protected income". Calculate your Social Security benefit and if not comfortable with that portion as inflation protected, add some TIPS with a TIPS ladder. But, I'd limit that and diversify with corporate as well a T-Notes and T-Bonds for fixed income.

Some links:

https://opensocialsecurity.com

https://www.morningstar.com/bonds/high-tips-yields-are-retirees-best-friend

https://www.morningstar.com/bonds/its-time-consider-tips

https://tipswatch.com/2023/02/05/tips-on-the-secondary-market-things-to-consider

https://www.wsj.com/market-data/bonds/tips

https://www.bogleheads.org/forum/viewtopic.php?t=394380

https://www.bogleheads.org/forum/viewtopic.php?t=412123

https://www.tipsladder.com

https://www.bogleheads.org/wiki/Treasury_Inflation_Protected_Security

 

[theflower]

@pauledwardmorgan Dude, thank for such a great post, I really appreciate it!

 

[daisendoh2008]

@theflower UPAR ETF . You get 50 percent long treasuries, fifty percent long tips, plus some equities and gold per dollar invested.

 

[jake15]

@theflower TIPS are paying 2.5ish% + inflation.

But I would only buy them in a retirement. I would (am) also buying the actual bonds and will hold to maturity.

 

[resjudicata]

@theflower Can consider laddering into shorter term treasures presuming they're still above 4%. Mitigating reinvestment risk. Best to speak with an advisor. Regardless I wish you well and hope you can live comfortably off your interest instead of working at Walmart at 85.

 

[jackman915]

@theflower Split between annuity for longevity risk, TIPs for inflation and nominal Treasuries.

A few conservative REITs for inflation protection on equity side too.

 

[davidmark]

@theflower I'm not retired, but getting 6.3% for 12.5 years with investment grade corporates, VCLT, seemed like a no brainer to me.

 

[theflower]

@davidmark That’s nuts I am looking at that

 

[dazzlekitty7]

@theflower Bond funds are volatile in a rising interest rate environment… just a heads up.

VCLT is down 10% year to date. But if you held on and just used it for dividends and never need to sell any of it then it could be viable.

Personally I’d go with something a little shorter term like a 12 month 6% cd or tbills at different durations.

Might want to keep an eye on JEPI/JEPQ as well they have high yields , but also capture some of the equity gains / losses . I’d personally go with JEPI over VCLT. JEPI/JEPQ are higher risk with a bot so long track record… just a heads up.

 

[michaelmtincher]

@davidmark This actually doesnt look at bad idea. Obviously this would have to be like a 2+ year play tho

 

[claire_]

@theflower Look at $HIGH instead. Tbill ETF plus a very conservative covered call strategy. 9% yield… virtually no change in share price up or down.

 

[yodo]

@claire_ For those down voting this, why exactly? I see the 52 week low but it’s 1% and tracks with recent events. Otherwise it seems not horrible?

 

[claire_]

@yodo Some people hate covered calls and seem them as risky no matter how they are implemented.

Generally low-information investors. Which is to say, 95% of Reddit. Lol

 

[yodo]

@claire_ It just seemed like a knee jerk from folks who bought the high and don’t DCA

 

[kev888]

@theflower Bruh, trust companies not the government. While I’m sure it could be fine, it only takes one screwball politician