Interest Rates and Bonds

[COcheesehead]

Sorry I should have been clearer. In the current situation would you build a 2/6/9/12 month ladder, go further out, or something else. I am thinking about US Treasuries.

Sorry, I misunderstood.

Ladders are a moving timing device by their nature.

I used my ladder to accomplish a goal: bridge to social security in 9 years. So I am laddered out to 2032 in my state specific muni’s and at an amount equal to fully funding our expenses without touching equities until after 2032.
I just follow the strategy from there. I had a bunch mature recently and reinvested them at 4.25%-4.5% double tax free. If the rates go up, more fresh cash is coming soon. If rates reverse, I have some higher yielders on the longer end of the spectrum.

 

[NW-Bound]

I'm not sure if that works, but better interest rates definitely help.

Remember that WR is only calculated at retirement and then the WR amount is then increased for inflation each year.

So if you start at $1 million with a 4% WR then the first year withdrawal is $40k and if inflation is 5% in the first year then the second year withdrawal is $42k.

Yes.

Ideally, your stash would also grow to at least $1,050,000 to match that 5% inflation.

But if instead, your stash loses 20% and becomes $800,000K, and you now draw $42k. That's 5.25% WR.

The 20% portfolio loss is not too out-of-line with the current situation, but the inflation rate is not 5% but closer to 10%. The WR of $44K is 5.5%.

Say hello to SORR (Sequence of Returns Risk).