Hey everyone, I’m closing in on early retirement, and bonds are on my mind. I can’t predict the market, but I can plan for different outcomes. Sequence-of-returns risk (SORR) early in retirement is one of the biggest factors that can derail a portfolio, so my goal is to protect against that risk in the first years and make sure my money lasts for a 50-year horizon.
To hedge SORR, I’m considering putting about 25% of my portfolio (≈7 years of expenses) into bonds. I know the classic 60/40 split, but I’m leaning more aggressive on equities for long-term growth while keeping a solid, conservative safety net. It feels a bit like a barbell approach: very safe bonds on one side, riskier equities on the other. For context, my equities are split 65% VTI / 35% VXUS.
Bond plan (25%):
- 10%: 12-rung 52-week T-bill ladder
- 10%: Quarterly 5-year TIPS ladder
- 5%: Long-term Treasuries (ETF: VGLT)
How I’d use it:
- Market drop <15% from 12-month high → use equities for expenses
- Market drop >15% → T-bills as first line of defense
- Persistent inflation → TIPS
- Recession/market shock → Long-term Treasuries (if they spike, like in 2009 or 2020)
Debating tweaks:
- Swap 52-week T-bills for 2-year notes to better align with monthly expenses
- Use 10-year TIPS instead of 5-year
- Split long-term and intermediate Treasuries (ETF: VGIT) since intermediate outperformed in 2020
Curious how others handle SORR early retirement. Any tweaks, suggestions, or personal experiences would be awesome!
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