That would be close, but yep. If you could actually guarantee a US bond for 6.5% over a 10 year period, that would imply that the US is stable (especially if we take over Greenland), and if so, a stock market return of 7.4% over 10 years is also an almost guarantee.
That would be close, but yep. If you could actually guarantee a US bond for 6.5% over a 10 year period, that would imply that the US is stable (especially if we take over Greenland), and if so, a stock market return of 7.4% over 10 years is also an almost guarantee.
Interesting. The beauty of the question is how subjective the answers are. I'd take guaranteed 6% over 10% expected for stocks.
So, would a 30 year US Treasury at 5% be even better?? Well, because of the Greenland mess, the 30 year US Treasury hit 4.9% today. If the Greenland debacle continues, we may easily see 5%. If that happens will you sell all your stocks and by the 30 year treasury? I dare you 😋.
- Out of curiosity, why FBLAX (ER=0.43) over Vanguard Lifestrategy Moderate (ER=-0.24)? Here's why https://testfol.io/?s=cqcgP9BxhiD
Aha! The difference in past returns is because FBLAX is closer to 70% equity (compared to 60%) and because it only holds 4% international and VSMGX is 25% international stock. I trust you've asked yourself: do I expect this difference to continue for the next 30 years? Plenty of smart people (like @pizzaman) say "yes!". Plenty of others say "no, diversify so all your eggs aren't in the American basket." But I have a hunch you've carefully thought through this part of your plan.
Technically, FBALX can vary equity allocation between 50-70% and I'm sure it has varied over the 40 year life of the fund. As for the international basket, I'm comfortable with the fact that 70 to 90% of Fortune 100 companies are multinational. This fits with my ultra-simple investment plan for DW. She knows it's all about FBALX. Let the chips fall where they may.
As for paying for PRC. I wish I could just pass it up, but it's so awesome and I'm a retirement calc junkie. Everyone has their vice!
- What are you assuming for planning lifespan for yourself? your spouse? Both lifespans set at 94. Both our grandmothers lived to 94. My GF 89.
- What are you assuming for Inflation? Using 2.5% inflation
- How much are you adjusting your expenses by life phase? And how much are you spending in Year 1?
- Go-Go (60-70) Spending is X
- Slow-Go (71-80) is 0.81X
- No-Go (81-EOP) is .41X
- Blanchett found that high net worth individuals adjust more as they age than low net worth individuals, because a higher portion of their spending is discretionary
- What are you assuming for Long-Term Care costs? (How much, how long, starting when) Self funding LTC
- Do you have HSAs? If so, what is your withdrawal plan? No HSA. Both are very healthy at this stage with projected life expectancies in the mid to upper 90s according to some calculators.
Hi @nanosour,
Thank you!
Below are a few thoughts for your consideration.
- Planning Lifespan - I personally wouldn't be comfortable building a retirement plan ending at age 94 when the projected life expectancy of both me and my wife were each in the "mid to upper 90s". That implies that you each have a >50% chance of outliving your plan. (Meaning, you each probably will, and it's very probable that at least one of you will). I personally have a life expectancy of about 88 and I plan to age 100 (For me that's the ~5% probability of outliving my plan)
- Suggestion #1: Consider following @jkandell 's recommendation to extend your planning period the the joint 10th percentile age that either you or your wife may live until. That should be farther out than the 10th percentile that either just you might live to AND farther out than the 10th percentile that just your wife might live to.
- Inflation - I'm comfortable with a 2.5% inflation long-term inflation assumption. I personally have a long term inflation expectation of about 2.4% in my plan.
- Suggestion #2: Stress-test your plan against a ~10% inflation rate for the first 10 years of retirement before dropping back to 2.5% for the rest of the plan. That's what happened back in the 1970s during the "Stagflation" era
- Retirement Spending Smile - I personally wouldn't be comfortable assuming that my spending would drop to 0.4x during the "No-Go" years.
- Suggestion #3: Review the following references about retirement spending and consider adjusting your No-Go spending expectations a bit higher. Relative to your age-60 spending, consider ~0.65x in your no-go years if you currently spend >$100k/yr and/or have >$2M in assets today.
- JP Morgan - Retirement spending trends by age as a function of net assets
- https://money.com/retirement-rich-spending-cut
- https://www.mymoneyblog.com/jp-morgan-guide-to-retirement-2022.html
- Key takeaway: For those with $2-5M in net assets, their Age 80-84 spending drops to ~0.6x their Age 60 spending
- David Blanchett - Retirement Spending trends by age as a function of initial retirement spending
- https://www.financialplanningassociation.org/article/journal/MAY14-exploring-retirement-consumption-puzzle
- Key takeaway: For those spending $100k/yr at age 60, their Age 80-84 spending drops to ~0.7x their Age 60 spending
- JP Morgan - Retirement spending trends by age as a function of net assets
- Suggestion #4: Be sure to incorporate increasing spend on healthcare after age ~80.
- Suggestion #3: Review the following references about retirement spending and consider adjusting your No-Go spending expectations a bit higher. Relative to your age-60 spending, consider ~0.65x in your no-go years if you currently spend >$100k/yr and/or have >$2M in assets today.
- Long-Term Care Expenses: If am comfortable assuming that you will "self-fund" your LTC if you have > ~$1M in net assets today. I assume the same in my plan. Just make sure you explicitly include those expenses in your plan.
- Suggestion #5: Assume total combined LTC of ~$300-$700k (REAL) for you plus your wife. I personally modeling this as ~$100k/yr for 5x years in the last 5 years of my plan.
- Note: If you tell it that you plan to self-fund LTC, Boldin retirement planning SW will auto-populate an LTC expense of ~$300k (REAL) for singles and ~$500k (REAL) for married couples.
- Suggestion #5: Assume total combined LTC of ~$300-$700k (REAL) for you plus your wife. I personally modeling this as ~$100k/yr for 5x years in the last 5 years of my plan.
Very warmly,
Kevin
One late addition:
- Future Stock Returns - I believe that FBALX approximates a 60/40 portfolio, and if so I wouldn't be comfortable assuming 8% nominal return CAGR% (5.5% Real) and 12% standard deviation on FBALX in my retirement plan. In my own plan I assume ~5.5% real expected return CAGR% (17% Std Dev) for the US stock market, and the consensus average of this group is lower.
- Suggestion - Consider revising down your return assumptions for FBALX based on whatever you expect the underlying real return of US stocks will be. For example, if you assume a real return CAGR% of 5% for stocks and 2% for Bonds then FBALX expected return CAGR% would be ~3.8% real (~6.3% nominal).
Best regards,
Kevin
One late addition:
- Future Stock Returns - I believe that FBALX approximates a 60/40 portfolio, and if so I wouldn't be comfortable assuming 8% nominal return (5.5% Real) and 12% standard deviation on FBALX in my retirement plan. In my own plan I assume ~5.5% real expected return (17% Std Dev) for the US stock market, and the consensus average of this group is lower.
- Suggestion - Consider revising down your return assumptions for FBALX based on whatever you expect the underlying real return of US stocks will be. For example, if you assume real returns of 5% for stocks and 2% for Bonds then FBALX expected return would be ~3.8% real (~6.3% nominal).
Best regards,
Kevin
Thanks Kevin,
I could lower the nominal return but it would only lower my final legacy at EOP. Over 40 years FBALX has been through many significant market events and has a CAGR of 10.59% with a std dev of 11.83% since inception. I feel my only real risk is sequence of returns, especially given the past 3 years of market returns. Makes me a little cautious about the next 3 years, but there is much cushion between my PRC plan and the actual lifestyle we've lived over the past 30 years. That is the biggest thing I'm struggling with right now. How to turn into a spender after saving and working towards this goal of early retirement.
@jkandell OK, I am getting a better handle on TIPs, thanks much! From one of your suggested links:
Q&A on TIPS David Enna, Tipswatch.com (updated June 28, 2025)
Who should buy Treasury Inflation-Protected Securities?
First off, I want to state loudly that TIPS are for preserving wealth, not building wealth. If you are in the early stages of investing and far from your long-term needs for buying a house or for paying for college or especially for retirement, TIPS aren’t going to be a great investment. That’s especially true when yields are less than 1% over inflation. You probably won’t build enough wealth to meet your goals.
However, if you are nearing retirement, or in retirement, and have an adequate nest egg, then TIPS make sense as part of your investment portfolio – especially if you buy and hold them to maturity. That strategy is risk-free, and you can protect a part of your savings from the dangers of unexpected inflation.
The example I gave a few posts up came up with a yield (annual rate of return) about 1% above inflation, just what the above Q&A states, cool.
Today's yield on 10-Year tips held to maturity is about 1.85% (real).
Not comparable to stocks, but the closest thing to truly riskless investment that I know of.
The example I gave a few posts up came up with a yield (annual rate of return) about 1% above inflation, just what the above Q&A states, cool.Today's yield on 10-Year tips held to maturity is about 1.85% (real). Not comparable to stocks, but the closest thing to truly riskless investment that I know of.
And if willing and able to go further out 2.3-2.6% (real).
Current Yield on 30-Year TIPS
The yield on 30-Year TIPS (Treasury Inflation-Protected Securities) is currently around 2.57% as of January 15, 2026. This yield reflects the return above inflation that investors can expect if held to maturity.
Historical Context
- Recent Changes: The yield has decreased by 0.04 percentage points over the past month but is 0.06 percentage points higher than a year ago.
- All-Time High: Historically, the yield reached a peak of 4.40% in January 2000.
Future Expectations
Analysts expect the yield to trade around 2.52% by the end of this quarter and potentially drop to 2.33% in the next 12 months.
This yield reflects the return investors can expect if they hold the TIPS to maturity, adjusted for inflation.
So, 2.57% yield plus 2.7% CPI-U inflation = 5.27%. Really?? So why not invest all your money in 30-years TIPs and retire happy?
So, 2.57% yield plus 2.7% CPI-U inflation = 5.27%. Really?? So why not invest all your money in 30-years TIPs and retire happy?
You're finally coming 'round, Pizzaman. 🙂 For expenses 30 years from now the TIPs is a very good investment. I am buying lots of TIPs in the 16-30 year range.
To me you would only take more risk than that if you (1) needed to because 2.6% wasn't enough for your needs, or (2) you wanted to maximize expected return with stocks. (Since 1900 there has never been a 30y period in which stocks didn't do better than 2.6%--often at least double.), (3) liquidity concerns along the way.
PS. Yield yesterday for the 30y TIP=2.60% real rate. Using your 2.7% 30y inflation assumption that comes to (1.026 * 1.027)-1 = 5.37%. (Addition is an approximation since it ignores compounding.)
So, 2.57% yield plus 2.7% CPI-U inflation = 5.27%. Really?? So why not invest all your money in 30-years TIPs and retire happy?
Yes, really.
...Although I might quibble that the 30-year CPI-U inflation is <2.5%; see the expected term structure of inflation for next 30 years* and guesstimate what the 30-yr CAGR% average is.
The reason to invest your "discretionary" budget assets into stocks rather than TIPS is that You can spend 2-5x more over your lifetime if you're willing to bet on economic growth over the next 30 years and the bet pays off as expected.
.
Payout of $1M compounded over 30 Years (all values REAL)
- $1M compounded at 2.5% = ~$2.1M <- This is the current TIPS yield (30-yr)
- $1M compounded at 5.0% = ~$4.3M <- This is the current expectation of the Bogle long-term expectation model (20+yr)
- $1M compounded at 5.5% = ~$5.0M <- This is the current expectation of the iERP model (10-yr)
- $1M compounded at 7.8% = ~$9.5M <- This is the 1950-2025 average of the S&P 500 (75 yr historical)
And remember, these are just the expectations, and there's a 50% chance you'll get EVEN MORE money from the stock market.
.
Personally, I like the idea of having 2-5x more money and I believe that the probability that Stocks will return >2.5% over the next 30 years is quite high. FWIW: Google Gemini says that the probability that stocks will return >2.5% REAL is ~82%, and probability that you won't lose money is ~96% (real returning >0%).
[Key assumption: Annual returns are independent and identically distributed, with 30-year CAGR% = 5.5%, with 17% annual standard deviation**]
Therefore that's a bet I'm willing to make in my retirement plan... so I start with an assumption of 100% stocks, then I search around for "hedging" investments that I can make that reduce the risk of stocks in the most cost-effective way possible.
For me, I've concluded that means buying a dynamically rolling TIPS bond ladder to provide ~7yrs of essential expenses to protect against bear-markets and recoveries, and trusting/betting/expecting that stocks will pay off in the long-run.
...
Notes:
*Expected Inflation Term Structure: <Image attached>
[Source: https://www.clevelandfed.org/indicators-and-data/inflation-expectations ]
** Since I believe there is some mean reversion, that means the actual probability should be probably closer to ~85% chance that stocks will return >2.5%, and ~97% chance of not losing money (returning >0%).
Future Stock Returns - I believe that FBALX approximates a 60/40 portfolio, and if so I wouldn't be comfortable assuming 8% nominal return CAGR% (5.5% Real) and 12% standard deviation on FBALX in my retirement plan. In my own plan I assume ~5.5% real expected return CAGR% (17% Std Dev) for the US stock market, and the consensus average of this group is lower.
- Suggestion - Consider revising down your return assumptions for FBALX based on whatever you expect the underlying real return of US stocks will be. For example, if you assume a real return CAGR% of 5% for stocks and 2% for Bonds then FBALX expected return CAGR% would be ~3.8% real (~6.3% nominal).
FBALX has correlated 98% since 2016 with about 70% VTI and 30% BND. (See here for a returns clone 66/22/6/5 and a factor clone 70/30.) If that continues the CAGR would be ~4.1% real using your rates for either clone. Far lower than 5.5% real that Nonosour is assuming--so I agree with your assessment. And if you use the much lower rates that e.g. Vanguard, Fidelity, and Research Affiliates use it would be in the 3.1% range.
Because you are implementing a conservative liability-matching strategy, you have a unique mathematical advantage: your lifestyle is already "insured" against a market crash.3. Bear Market Plan
- Suggestion: Consider explicitly making a "Tranche-Based Equity Glidepath" part of your plan, using the 30-40% "ballast" within your Discretionary Bucket to buy additional equities in tranches if the market drops 20%, 30%, or 40%. If you decide to make Roth conversions part of your basic plan, then also accelerate Roth conversions during bear markets/recoveries.
As you note my essentials bucket wouldn't change after a market crash (assuming little change in long term interest rates). My discretionary withdrawal would react in two ways to a market crash, based on the amortization equation pmt(discount%, years remaining, ,-npv discretionary bucket,0,1):
- the discretionary bucket would fall dramatically, since it's stock heavy;
- the discount rate would rise dramatically, as valuations plummet.
Note that these two temper each other: my discretionary bucket crashes e.g. 70%X-60%; but the larger discount rate will mean a larger "chunk" can now be taken out each year. Since my estimates returns are based on a mix of cape-based valuation and yield & growth predictions: both of these will soar after a crash. So a 60% crash might result in only a 30% reduction of discretionary withdrawal. (Jeske also has great historical analysis of "CAPE & x% drop from SP500 high".)
I think this ends up with the same results as a "tranche-based equity glidepath"? I do worry about the fact that my bucket approach has me decreasing AA when stocks are cheapest, which is the reverse of what is optimal. (There are studies proving this, e.g. Estrada on hypothetical Buckets in 21 countries 1900-2014.) Either way, I do need to figure out how to "buy when cheap" in a rigorous, rule-governed manner. (How would I do that?) Thank you for pressing it.
I completely agree with your perspective: since a stock market drawdown typically leads to higher expected future returns, your discretionary spending doesn’t necessarily need to drop in lockstep with the market.
A related factor to consider is adjusting your target legacy. If your total asset pool shrinks, it may be practical to reduce the amount you intend to leave for heirs rather than sacrificing your current quality of life.
.
Resources for building a Bear Market Plan
Below are three resources to help you formalize a "Bear Market Plan."
- Videos 1 & 2: These summarize plans incorporating Tranche-based Rising Equity Glidepaths.
- Video 3: While it doesn’t cover equity glidepaths in depth, it provides useful summaries of utilizing Tax Loss Harvesting and Roth Conversions during a downturn.
.
Why a "Playbook" Matters
The goal of a bear market plan is to provide a proven, trustworthy playbook for market crashes. By pre-validating a strategy against historical data, you remove the emotional weight of decision-making during a crisis. This pre-commitment allows you to act rationally and decisively when fear is highest.
As a reminder, a Tranche-based Equity Glidepath involves increasing your percentage of equity allocation in predetermined steps as the market hits specific drawdown triggers (e.g., increasing your buy-in at -10%, -20%, etc.).
.
Personal Perspective & Next Steps
I found my own plan incredibly reassuring during the April 2025 bear market. Having a "ready-to-go" strategy, combined with an adequate TIPS ladder to weather the recovery, allowed me to stop stressing and sleep better at night.
Before finalizing your strategy, I strongly suggest back-testing your specific plan against at least 10 historical bear markets. No plan is 100% foolproof, but knowing your strategy would have succeeded in the vast majority of prior crashes will give you the confidence to stick to it.
Best regards,
Kevin
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VIDEO 1: "Income Lab Masterclass - Class 2: Next Level Tax Planning to Differentiate Your Firm"
R. Townsley
https://www.youtube.com/watch?v=Bj1rw1aHqsk
Bear Market Plan
- DO NOT PANIC. DO NOT SELL.
- Tap Your "Safe Money" First
- Reduce Discretionary Spending
- Tax-Loss Harvesting (TLH)
- Roth Conversions
- Rebalance Portfolios Methodically
Steps to take at various declines from all-time high (Drawdown & Actions)
- -5%
- Rebalance to your target equity %-age (e.g., 60/40)
- -10%
- Tax Loss Harvesting & Re-buy similar depressed securities
- Expedite Roth Conversions (x1), Rebalance to target long-term equity %-age (e.g., 60/40)
- -15%
- Stop liquidation of depressed asset, fund expenses by withdrawals from dedicated "safe money" income sources only (e.g., Bucket 1/2)
- -20%
- Tax Loss Harvesting & Re-buy similar depressed securities
- Expedite more Roth Conversions (x2)
- Rebalance to INCREASED target equity %-age (e.g. 60/40 -> 75/25)
- Adjust discretionary spending downwards if Guardrails indicate
- -30%
- Tax Loss Harvesting & Re-buy similar depressed securities
- "Full" Roth Conversions (x3)
- Rebalance to INCREASED target equity %-age (e.g. 75/25 -> 90/10)
- Adjust discretionary spending downwards if Guardrails indicate
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VIDEO 2: "I Analysed 100+ Market Crashes. Here's The Pattern That Will Make You Rich"
Anish
https://www.youtube.com/watch?v=MM-Wake1vsQ
Steps to take at various declines from all-time high (Drawdown & Actions)
- Pre-Drawdown
- Identify your "Opportunity Fund" of Cash/Bonds to allocate towards purchase of equities during drawdowns
- Note: This should probably be the non-equity "Discretionary Assets"
- Identify your "Opportunity Fund" of Cash/Bonds to allocate towards purchase of equities during drawdowns
- -20%
- Deploy 25% of Opportunity Fund
- -30%
- Deploy 50% of remaining Opportunity Fund (~37.5% of original fund)
- -35%
- Deploy 100% of remaining Opportunity Fund (~37.5% of original fund)
Sector Rotation: Anish also presents a strategy for sector rotation involving buying into whichever the most depressed sectors first, then rotating into broader cyclical sectors. I personally haven't included this type of strategy in my own plans because I'm a "whole market" investor, so won't try to summarize his strategy here.
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VIDEO 3: "What Smart Investors Do In Bear Markets"
Tae Kim - Financial Tortoise
https://www.youtube.com/watch?v=4yEvXnEJIqs
Topics addressed include decently good explanations of using Tax Loss Harvesting and Roth Conversions during bear markets.
