Cut-Throat,
I think I'd take the position that I can't predict future inflation hikes (declines) or future interest rate hikes (declines). Therefore, i think I'd do something like what Bob_Smith has. Maybe 1/3 short term (ST corp), 1/3 Intermediate Term, and 1/3 TIPS. Seems like nice even "round" numbers.
I'd stay away from nominal long term bonds.
This assumes that I have no other outside income (like from SS or Pensions currently). If I did have a good amount of my retirement income coming from SS (which is Cola'd), or coming from a pension (cola'd or non-cola'd), i might consider how that could affect my investment portfolio. For example, if my SS and pensions are inflation adjusted, I might not own all that much TIPS since I've already got inflation hedges (my pensions/SS). If my pension was not cola'd and was a good deal of my retirement income, I think I'd own a lot of TIPS. No pension would probably put me back to 1/3 in each (or something along those lines).
Also look at what your equity portfolio looks like, since it's not just how your bonds interact w/ each other, but how they interact w/ your equities as well. If you've got mostly TSM funds (like in Vanguard's Balanced Index, or one of their Target or Life Strategy funds), I think I'd go with TIPS and ST bonds. If you've got a serious value tilt going on, you could probably add more intermediate term bonds.
Personally, I like adding things like small value (and large value), REITs, emerging market stocks, etc., to a TSM dominated portfolio b/c adding these lowers portfolio volatility, and quite possibly increases future expected returns (although that's not that main point). TSM is certainly easier, but not as psychologically easing as slicing and dicing a little. TSM and growth stocks are also not as good hedges for a retiree who is at serious inflation risk as value, REITs, commodities - especially for someone who has a fixed pension.
Also, given that interest rates are low, I'd be looking to slash expenses wherever possible. For example, why buy nominal Treasuries in the IRA, when I can buy them for free in my taxable account (EE bonds or individual Treasuries for longer maturities)? And if I have to pay state taxes, I think I'd hold nominal treasuries (if I was going to in a bond index fund) in my taxable account to take advantage of the tax benefit. Although, given that CD's are paying such a higher rate than Treasuries of similar maturities, I think I'd stick w/ CD's b/c they may still pay a higher after-tax rate. Why buy CD's through in a brokerage account (and incur a transaction fee) when I can buy them for free in a taxable account or through an IRA at a CU? etc.
- Alec