Why bonds?

IMO, the market takes more than 3 years to recover from moderate drops (2000-2002 for example), so having more than 3 years cash in conservative instruments is a better practice to me.

But I am also 20-35 years away from needing to use this strategy (I think 7 years income in cash type investments is better).

The returns of bonds from around 2-years to 5-years in maturity have usually been higher than money market returns, for one thing.

"W. Wells" wrote

That thought entered my mind also. Thanks

Unless you are very bearish about bonds, that seems excessive.

In a normal interest rate environment, the yield on short term (sub 5 year to maturity) bonds exceeds that of short term interest rates.

Say you had $100k in short term cash, and estimated your immediate cash needs (for the next 12 months) to be $33k. You could invest the other $67k in short term bond funds, or in a ladder of bonds, and pick up 1-2% per annum in additional yield.

Right now that wouldn't work (inversely sloped yield curve) but it does, normally.

In my opinion you need five years in other-than-cash: money market, bonds, bond funds, etc. This is conservative in my opinion and may carry a high opportunity cost, especially if you are more than five years from retirement. The opportunity cost is the money you didn{t make because your money was not invested in equities.

Frank