Fixed Income / Cash Allocation review

[Russ2020]

I was hopping I could get some comments on my fixed income allocation. In the past, before retirement, I just kept all of bond exposure in total bond. A few years ago Vanguard had me move into a few other bond funds. I am now second guessing this and have a feeling I should tinker with this. In the past twenty years I have been very good at staying the course although I recently purchased a three year CD because it was a great rate.

So I am thinking should I not have investment grade bond funds OR should I move my intermediate investment grade bond fund into the short term investment grade bond fund OR should I dump both of those into total bond OR should I just leave everything alone.

I maintain a 40% equity allocation. All fixed income except the money market and loyalty checking shown below are in tax sheltered accounts. For the rest of this year we will be living off the money market and loyalty checking accounts. In the next 2-3 years we will be living off our taxable account and then rebalancing in the tax deferred accounts to maintain equity allocation.

Any thoughts? Stay the course or tinker? Thanks in advance for any replies.

 

[OldShooter]

What problem are you trying to solve?

 

[Russ2020]

What problem are you trying to solve?

I really have no idea. I hear a lot about corporate bonds becoming a problem. I will have to sell bonds in the coming years to finance retirement. I guess I am just uneasy.

 

[OldShooter]

I really have no idea. I here a lot about corporate bonds becoming a problem. I will have to sell bonds in them in the coming years to finance retirement. I guess I am just uneasy.

OK. We all feel that way from time to time. First, try to write down your objectives, needs, etc. Maybe do some reading. I like "The Coffee House Investor" by Bill Schultheis (https://www.coffeehouseinvestor.com/) but it does not directly address your bond question. I am not a bond guy but someone will be here soon who can recommend bond books.

Are you sure a 40/60 AA is right for you? At least review that, as the right numbers depend heavily on the total size of your stash, your spending rate, age, estate objectives, etc. There are brain-dead formulas based solely on age. Do not pay any attention to them.

Do not be in a hurry here. You have plenty of time to think and study. You will certainly get some specific recommendations from this group; try to understand and think about them. But if even you do not know what problem you're trying to solve, how can SGOTI really be of any help?

 

[audreyh1]

My fixed income is in cash, short term bond index fund, and most in regular bond index fund which is generally of intermediate duration.

I like to have some diversification across durations up to intermediate - a bit like laddering although I rebalance between them.

 

[Russ2020]

I have spent a lot of time on the 40/60 allocation. I realize it is conservative. I have spent many hours with Firecalc, I-0rp and Vanguard and 40/60 should be OK. It sure has been nice this last turndown.

 

[VanWinkle]

Hi Russ2020,

I determine the blend of my fixed income based on years of need for safer investments. I keep 1 year in rewards checking, 2 years in a short term bond index (VSCSX) and then split the rest(13 years) between VTBLX and VBILX.
Those are both intermediate bond funds with at least 50% government backed
bonds. I don't think there is anything wrong with how you are invested in fixed income, as long as it works for you and you can stick with it.

Best of luck to you,

VW

 

[OldShooter]

I have spent a lot of time on the 40/60 allocation. I realize it is conservative. I have spent many hours with Firecalc, I-0rp and Vanguard and 40/60 should be OK. It sure has been nice this last turndown.

OK, good. I was not implying anything pro or con, just that it is an important decision that underlies your bond question.

 

[pb4uski]

Is the CD an add-on CD? Some, but not many, CDs allow additional deposits at the contract rate.

 

[Russ2020]

Is the CD an add-on CD? Some, but not many, CDs allow additional deposits at the contract rate.

No it was the introductory one at NFCU. The limit is $150K. I didn't know if I would get the advertised rate because I had to first open an account and then do an IRA transfer from Vanguard. This took nearly two weeks. In the process the offer went away but we were assured by three different employees we would get that offer.

 

[mrfeh]

My fixed income is in cash, short term bond index fund, and most in regular bond index fund which is generally of intermediate duration.

Very similar to our approach.

To the OP - the changes you're considering probably won't make much of a difference either way. If you feel you need to do something, I'd get rid of the corporate intermediate and put it either in total bond or VFSUX.