pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
More information about the goal is required.
We have established that 3.5% (14k/400k) is within the possible range of bond returns. Individual bonds, fixed duration bond ETF, fixed maturity (bullet) and credit risk (Treasury, Corp, Hi Yield) are all open questions / variables.
As OP indicated he was entering retirement, I'll suggest that bullet shares are not appropriate as maturity is too near term (< 10y).
The Gugenheim data does suggest that if we want to establish 3% as a lower yield boundary and also minimize Bond ETF duration (as interest rates are expected to rise), and use Corporate bonds (not Treasuries or Hi Yield), then you can establish a rough duration of 7-8 years.
OP will need to decide if a 3% coupon on individual bonds is preferred over bond ETF. Google can find many sources comparing individual bonds to bond funds. The most important of which is that the bond ETF will attempt to maintain a roughly constant duration.
In considering individual bonds, I'd compare them to something like Vanguard Intermediate-Term Corporate Bond ETF, Duration 6.5 years, yield 3%. Individual bonds may have a longer duration matched to OP's needs.
I will also note that long term individual bonds will create a significant interest rate risk if the bonds need to be sold before maturity with longer duration.
If the OP is looking to match the bond duration to retirement duration and that is more than 10 years, then individual bonds may fit this requirement better than an ETF with a constant duration. Bullet's would work but only for short duration.
If the amounts of money are small, the ETF may provide a better vehicle for diversification of risk than individual bonds including the ability to mix Treasuries and Hi Yield to hit the target yield.
Also consider inflation, 2.5% inflation over 30 years will half the purchasing value of the bond at maturity. Or your 400K will be worth 200K in 2047 with 2.5 annual inflation.
I don't think the OP is looking for a bond ladder for his entire retirement since this is just 1/3 of his portfolio... most CDs and target maturity bond funds have maturities of less than 10 years and I think that is what the OP is looking for.
In order to get 3.5% as the OP suggests, one needs to either go long or concede some credit risk.... I suspect that the OP assuming some credit risk rather than going long but it is hard to tell from the OP.
While conventional bond funds/ETFs try to maintain a relatively constant duration, individual bonds and target maturty bond funds will have shorter durations as they get closer to maturity... but if one is refilling the ladder at the long end as bonds mature, then the duration shoudl be relatively constant.