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They pay a coupon rate (currently 3.94%) each year based upon an inflation indexed principal value (ie the interest payments vary with the CPI). Upon maturity they return the inflation indexed principal amount.

So, that would seem to guarantee a 4% return, but I'd still rather use stocks with a 5 year bond ladder. Even with the variation in the stock market, one would be able to withdraw 4% per year and raise that amount for inflation each year. That is the worst that is likely to happen!

In all likelyhood, the market will exceed the 4% plus inflation amount, and allow one to draw on a much larger nut.


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