...do you use your Short Term Corp in lieu of a money market in your IRA? I have moved one year's worth of expenses to a money market within my IRA and will begin monthly transfers from my IRA in September when I hit 59 1/2. I thought about using the ST Corp instead, but figured it might be best to avoid the fluctuation in NAV.
Bill, after receiving your message I looked at the numbers and it appears that one would have done better over the past 20 years by keeping their current year's living expenses in the ST Corp fund while simply ignoring the NAV fluctuations. Here are numbers from the last 20 years comparing the total annual returns of the Vanguard ST Corp Fund and the Vanguard Prime MM Fund:
YR----------CORP----------MM----------------DIFFERENCE
2003 ----- 4.20% ------ 0.90% ----------- +3.30%
2002 ----- 5.22% ------ 1.65% ----------- +3.57%
2001 ----- 8.14% ------ 4.17% ----------- +3.97%
2000 ----- 8.17% ------ 6.29% ----------- +1.88%
1999 ----- 3.30% ------ 5.01% ----------- (-1.71%)
1998 ----- 6.57% ------ 5.38% ----------- +1.19%
1997 ----- 6.95% ------ 5.44% ----------- +1.51%
1996 ----- 4.79% ------ 5.29% ----------- (-0.50%)
1995 ----- 12.74% ----- 5.82% ----------- +6.92%
1994 ----- (0.08%) ----- 4.08% ----------- (-4.16%)
1993 ----- 7.07% ------- 3.01% ----------- +4.06%
1992 ----- 7.20% ------- 3.74% ----------- +3.46%
1991 ----- 13.08% ----- 6.14% ----------- +6.94%
1990 ----- 9.23% ------ 8.27% ----------- +0.96%
1989 ----- 11.45% ----- 9.39% ----------- +2.06%
1988 ----- 6.95% ------ 7.59% ----------- (-0.64%)
1987 ----- 4.46% ------ 6.65% ----------- (-2.19%)
1986 ----- 11.42% ----- 6.61% ----------- +4.81%
1985 ----- 14.90% ----- 8.08% ----------- +6.82%
1984 ----- 14.22% ---- 10.57% ----------- +3.65%
It appears that one would have come out ahead (sometimes significantly) in 15 out of 20 years. Even in the 5 down years one would have made more than enough extra in the previous year or two to cover the loss in the down year, assuming living expenses are relatively stable from year to year.