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Thanks, CNC

What it doesn't do is protect against the incessant inflation we have experienced during most of my long life.

It won't protect against unexpected inflation, but it is fairly straightforward to set a bond ladder up to protect against expected levels of inflation. Simply increase the size of each subsequent rung of the ladder so that the maturing bonds keep pace with the expected inflation level.

So for instance, if you expect a 3% inflation rate and need your portfolio to cover $24,000 in first year expenses, you'd set up the first rung to mature with $24,000 in value and the second rung to mature with $24,720 in value, etc.

My personal thought on what to expect for inflation when setting up a new rung would be the larger of 3% (around the long run inflation rate) or whatever the past 12 months' inflation rate was.

Runaway inflation could be a problem, but I fail to see how bond funds or longer term bonds starting from current interest rates would fare much better, given that runaway inflation would likely bring with it an increase in interest rates and decline in existing longer term bond prices.

Regards,
-Chuck
Inside Value Home Fool
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