I feel that there are four categories here:I was not aware of TIPS funds! I currently have 20% in the Vanguard BND ETF. I was wondering if I could replace the BND fund with individual TIPS bonds, (I suppose, I am not very clear on the TIPS terminology). Philosophically, I have been pondering over how much money will I need in retirement and what would be the safest place to keep it, so in retirement I don't have to worry about any market risk. My plan was to keep increasing the BND position as I age but when I see the BND value going up and down,I wonder if holding some form of TIPS will be safer than BND.
Individual TIPS Treasury bonds.
Individual nominal (non-TIPS) bonds.
TIPS bond funds.
Nominal bond funds.
I'm guessing that by TIPS you're referring to individual TIPS treasury bonds, and by bonds you're referring to nominal bond funds.
TIPS do pay a coupon payment, but that payment is only part of your yield on the TIPS--the other part is the inflation-adjusted principal. So what you receive in coupon will generally be less than a nominal bond.
If I wanted bonds for coupon-payment income, I wouldn't go to TIPS. I own TIPS for the predictable inflation-adjusted principal that will spill out at maturity, for me to either spend or reinvest.
I'm building a non-rolling ladder of individual TIPS intended to pay a portion of my basic expenses (a pension should pay another portion) from start of retirement in a year or two or six, to Social Security. At that point Social Security and pension together should provide "enough"--or at least provide the figure that I have tentatively calculated as enough. Then the ladder pauses and picks up again several years later, after inflation will have nibbled the pension down so that there's no longer "enough."
We're also building a ten-year rolling ladder of ten-year TIPS. It will spill out money every year in case we need to be rescued from an unexpected cluster of expenses (say, the roof AND the car AND that big tree AND the washer/dryer all decide to die early and at once), but if all goes according to plan it would just be promptly reinvested for another ten years. In theory, if we spend a rung or part of a rung, we would hope to replenish it in the next few years so that it spills out again on the tenth anniversary of the spending. In theory.
Statistics: Posted by BirdFood — Sat Aug 10, 2024 2:14 am