"I'm counting the pension portion of my portfolio as my bond fund. My plan is to have 5 years living expenses in laddered CDs and the rest 100% in equities. If the market is down I will not sell any stock that year, instead I will live off a CD. The five years worth of CDs will give me a cushion against the down years and will guarentee the income I need for the short term. At the same time it will allow me to stay invested in the asset that has historically had the best returns."I think this is pretty reasonable. If you have a target asset allocation, you may wish to quantify the notional amount of your pension by figuring out what it would cost you to buy an equivalent payout annuity. Then you could add some additional bond exposure if you are not up to your target. I think the CDs are an excellent choice for "sleep at night" factor. They also get you exposure to fixed income."I don't have a option of putting REITs into my 401k and I don't want it in a taxable account, so I am going with out that asset class."Considering how expensive REITs have gotten, this probably isn't a bad idea.
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