Should Cash Replace Bonds In A Retirement Portfolio?

I've added links to the resources mentioned in the video.

I have been selling some IRA shares at the highs to build up cash (making 5%) in the IRA. If a crash happens I'll buy shares at lower prices. If no crash I'll do retirement distributions from the cash as needed. I've been through crashes since 1987 so having cash ready in the IRA is better than watching all share prices crashing.

I'm retired (74) and am very happy with a sustained return of 5% with CD's and T-Bills. Won the game, stop playing.

Very good explanation.. love your channel thanks Rob!

When I graduated college in 1980, my first job was to invest cash for a large public utility, usually in repos, commercial paper, and CDs. At one point in 1981, overnight rates were 22%! My salary was about $20,000, and I remember thinking, if I had $100,000, I could sit back and invest that money and make as much as I do in my job! That was a highly inverted yield curve, which was due to the Fed's Paul Volker fighting inflation. Today, I doubt we will see the low short term rates we saw during the ten yeas leading up to 2021.

You always explain everything so clearly. Thank you! Just subscribed to New Retirement.

Rob, I agree that it is inevitable that interest rates will go down and the benefit of holding excess cash will end. I am one of those people that, based on the poor performance of my bond fund (FXNAX) and attractive CD rates, I temporarily switched all my bond funds to cash. I am ready to get out of cash and go back to bonds, yet I still am leery, which is why I'm watching this video. I am also looking into using a high dividend yield fund instead of bonds. I can easily sit out downturns in the market. I just believe there must be a better alternative to bonds. Thanks for your video.

No more intermediate Bonds like BND. I feel good by simply building portfolio of VOO/VGT/SCHD, and 2+ years of cash w TBills/MM?

T-bills, notes, bonds are state tax free. I'm in NYS at 6.85%. I think this is worth considering but was never mentioned.

As usual Rob excellent presentation. providing the necessary background to make an informed decision. I think a lot of investors that have a well funded retirement and want to leave an inheritance are looking at vehicles to park some of this return. Personally if a take a portion of my returns this year and lock into 10 year bonds at the current rates (I am 75) I am not going to lament the fact that I missed out on a higher return with the allocated dollars. Retired at 60 and have made minorr adjustments to my plan. However, looking at kicking up my bond allocation that will not impact our retirment spending. Really really appreciate the presentations and the weekly news letter!!!

Thanks - always enjoy your videos. I had invested my Bond fund in VBIRX (short-term Vangaurd Fund) a few years back since I was getting close to retirement (when I moved from an advisor to do-it-yourself), and have since retired at the end of March. It's performed better in the rising interest rate environment, but I've been contemplating moving it to VBTLX. Target percentages are 70% stock and 30% Bond, but I'm currently at 28.3% Bond/Cash (split between 19.6% VBIRX and 8.6% VMFXX). So I have the exact timing problem you referenced in your video. All retirement spending so far has been out of my settlement fund (VMFXX).

Also worthy of mention is when the stock market crashes the flight toward safety raises the prices of intermediate bonds. So you benefit by selling your bonds, not stocks, at higher levels unlike cash.

What about a minus 12% 5-yr loss to principal for BND?

Short answer: Cash only has inflation risk. Individual bonds have credit risk and bond funds have interest rate risk in addition to inflation risk. Cash has less risk, so it wins if rates are similar.

Great video thank you! You are the first person I've heard explain what the inverted curve is in layman's terms so that I actually understand it! And there have been many on TV and radio that keep throwing around the "inverted curve" and don't explain it, or try to explain it and are unsuccessful :o)

Planning for retirement can be so confusing, especially with all the new numbers for 2024. How much is really enough to retire comfortably without constantly worrying about outliving your savings?

The only American who won't acknowledge this Administration's failed economic policies is Joe Biden. "Shrink-flation' is the least of our worries compared to rising rents and stagnant wages, but it is an undeniable indicator of how bad our inflation has gotten. I have $100k that i like to invest in a non-retirement account, any advice on that?

Thanks for the detailed and timely information. One of the things I do often get confused on in these discussions is the difference in owning individual bonds vs bond funds. You spoke a lot today on individual bonds. However you also mentioned that BND has a 4+% yield. That's all well and good, but it also has a negative YTD return. So when people are looking at replacing their fixed investments from bond FUNDS to more cash investments, how should they look at that? Would love to better understand that further. Bond fund total returns have been poor for a long time - but my confusion comes in where you keep bringing in the current yield into the discussion, which makes them 'appear' much better.

I love how you take your time to educate your viewers. I'll be 56yrs in January and have about $130k in bonds but the erosion of my financial reserves due to inflation is my main worry.

Good video, Rob. Vanguard Total Bond Market Index is a good bet. Thanks