Thank you. That puts it in perspective.Intermediate-term bond fund values started dropping in Aug 2020.I was thinking of a shorter retirement time period. For example a person who retires at 66 FRA has approximately 15 years remaining according to the social security life expectancy chart. During that 15 years the retiree is drawing down the portfolio and taking RMDs. If there is a significant drop in bond values during that period the longer duration may prevent the investor from recovering. I would think older investors must still be negatively affected by 2022.
For funsies (and to illustrate the point), let's assume a 100% bond fund portfolio.
Here's Total Bond vs Short-Term Treasuries with an initial 4% withdrawal rate.
Here's Total Bond vs. Short-Term Treasuries with a 6% withdrawal rate (since you said shorter retirement).
~30% drawn down (withdrawing in a down market) from retirement portfolio value at the pop of the biggest bond bubble in history w/ a 6% withdrawal rate. Oh, and heading back up.
Now throw some stocks in there and make it 50/50.
Higher portfolio value now than at the start of retirement.
But what if stocks hadn't recovered so quickly?
Make that start date a year earlier for the all bond portfolio.
Not really much of a difference, right?
But that doesn't help if you retired at the bond market peak!
But it does tell you that in about a year or so from now, there won't be much of a difference.
I hope this helps you see that intermediate-term fixed income is fine, especially in a diversified portfolio.
Statistics: Posted by oakbluffs — Thu Oct 10, 2024 12:02 am