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Thanks, Rayvt --

When stated like that, does it even make kitchen-table sense?

Actually, the bond ladder method follows a very similar withdrawal strategy to the target allocation method. No magic prediction ability needed, and an analogous 'weight against the recent winner' process at play.

Assume the stock market goes up a lot. In the "keep a target allocation" method, you sell off a higher portion of your stocks to fund your living expenses, perhaps even keeping your bonds whole or even increasing them if you're still above your target allocation. In the "bond ladder" method, you have enough excess gains from stocks to add a rung to your bond ladder. Either way, you're actively shifting towards bonds from stocks.

Assume the stock market tanks. In the "keep a target allocation" method, you're presuming the 'typically more stable' nature of bonds to withdraw more from your bonds, because they've become a proportionately higher part of your portfolio. You'd likely leave your stocks more alone, or in a really bad market contraction, still need to rebalance from bonds to stocks to keep your target allocation. In the "bond ladder" method, you'd let a rung shrink from the bond ladder, increasing your stock allocation. Either way, you're actively shifting towards stocks from bonds.

Assume the stock market performs as expected. In the "keep a target allocation" method, you're selling both some stocks and some bonds to fund your cost of living. In the "bond ladder" method, you're using maturing bonds to fund your cost of living (using bonds) and you're selling stocks to replace the maturing bonds (using stocks). Either way, you're effectively remaining about neutral from an allocation perspective.

From that vantage point, the key difference seems to be that the target allocation method is more exposed to rapidly rising interest rates while the bond ladder method is more exposed to unexpectedly high inflation. Since those risks are frequently two sides of the same coin, their risk profiles actually look fairly similar as well.

Sure, a long term secular stock market decline can be a problem, but that holds true for both methods. It's just that academic studies tend to downplay that particular risk as they frequently use some probabalistic trigger to estimate future returns based on the frequency of past returns. And since the ranges of those probabilistic triggers are typically set based on history, the underlying presumption remains a rising market over long periods of time... Unless you save substantially past what the 4% rule requires, I'm not sure how you get away from that particular underlying presumption and still project a sufficient portfolio balance to last throughout a long retirement.

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