TIPS funds: FIREcalc inputs, withdrawal strategy..

[Cb]

At present, my intention is to allocate 35% US TM, 35% Int'l TM, and 30% TIPS just prior to retirement. (I'm at 50/50 US/Int'l equity TM's currently)

After reading the recent Scott Burns book and a similar book by Peter Peterson, I suspect that inflation will likely be greater in coming decades than it has been recently. That leads me toward TIPS for my FI allocation.

My preference would be to hold TIPS via the Vanguard TIPS index, and simply withdraw 6 mos living expenses in January & July from the three indexes as required to maintain my target allocation, dumping the $$ into an ING money market account which we'd draw from. Does that seem like a reasonable approach?

Is there a more efficient way for me to hold TIPS as the primary FI portion?

How might I most accurately handle this in FIREcalc? Enter a TIPS rate of 2.1%, and let the portfolio expense ratio down below account for Vanguard's 0.18% ER?


Thanks,

Cb

 

[wabmester]

Re: TIPS funds: FIREcalc inputs, withdrawal strate

withdraw 6 mos living expenses in January & July from the three indexes as required to maintain my target allocation, dumping the $$ into an ING money market account which we'd draw from.  Does that seem like a reasonable approach?

That's one way. Or, rather than reinvesting dividends, funnel the dividends into your MM and make up any short-fall by rebalancing.

Is there a more efficient way for me to hold TIPS as the primary FI portion?

TreasuryDirect will give you a better yield and lower costs, but VIPSX will give you more liquidity.

How might I most accurately handle this in FIREcalc? Enter a TIPS rate of 2.1%, and let the portfolio expense ratio down below account for Vanguard's 0.18% ER?

VIPSX yield before expenses is approximately that of the 10-year TIPS, which is currently about 1.8%, so use that instead of 2.1% if you plan to buy VIPSX.

 

[Cb]

Re: TIPS funds: FIREcalc inputs, withdrawal strate

TreasuryDirect will give you a better yield and lower costs, but VIPSX will give you more liquidity.

Thanks for the reply...any advice as to how I might use TIPS purchased via Treasury Direct? I'm looking to draw about 60K annually (prior to SSI & pensions) and would have an FI allocation of approximately $400K.

Cb