We keep six years in cash equivalents and use mostly t-bills. I prefer short durations with little or no price movement when interest rates change. Balance is in equities. No bonds for us at this point. RE and mid fifties

i-bonds are nice because they are tax free until you make a withdrawal, but they do not have retirement age restrictions like retirement accounts. High yield savings accounts are good too. Many offer higher interest rates than bond indexes or CDs, and the money is readily available.

Are you accumulating or decumulating? Or is this for intermediate funds like house down payment or car? Or is this emergency fund cash?

if reference to sequence of returns risk I assume decumulation, so I’ll answer with a question, are you aware of risk parity portfolios? Check out this podcast episode for an overview which may open you up to the true point of bonds / cash and diversification.

The Secret to a 5% Safe Withdrawal Rate | Frank Vasquez

by BiggerPockets Money

For bonds, you would want something that is diversified from equities, so corporate bonds don’t fit, nor junk bonds, but rather intermediate and longterm treasuries. This is recession insurance for a large drawdown in a full recession (see 2000s).

For cash equivalents, could be as easy as fedility money market account or short term bond fund. if in high tax bracket and taxable account, consider boxx which has improved tax efficiency.

Key note is how much are you holding in cash? If more than 5-10% of your portfolio longterm it will drag down performance without much gain. Sequence of return risk isn’t a 2-3 year pullback but a 5+ yr drawdown.

Bonds play different roles in a portfolio depending on the duration of the bond. Bonds can provide income (short term bonds), stability (intermediate term bonds) or diversification (long term bonds).

Here’s a good discussion of these three uses.

Ep 194 | The Role Of Bonds In A Portfolio | Frank Vasquez

Ep 194 | The Role Of Bonds In A Portfolio | Frank Vasquez

Frank Vasquez analyzes bond roles in portfolio construction, examining stability versus diversity goals and asset allocation strategies for different investor needs.

ChooseFI

Instead of thinking about a cash “cushion”, cash should have an allocation just like any other asset in your portfolio. The recommendation is to keep cash to less than 10%. More than that and it drags down the overall performance of a portfolio.

Since you’re interested in mitigating risk, you might also enjoy this episode.

Ep 313 | Are You as Diversified as You Think You Are? With Frank Vasquez

Ep 313 | Are You as Diversified as You Think You Are? With Frank Vasquez

Frank Vasquez explains Ray Dalio's "Holy Grail" — true diversification means uncorrelated, not different.

ChooseFI

I’m also going to assume you’re talking about switching over to the drawdown phase.

I use laddered treasuries, held to maturity.

Learned my lesson in 2022 about the danger of using bond funds for short term spending needs, they all took a dump on me just as I was about to need them. Holding a treasury to maturity eliminates that risk.

When I officially retired, I kept 5 years of laddered treasuries (each maturing on 12/31 of their respective year). Now I keep 3. Each in the amount of my annual base spending level.

When I/we first retired 6 years ago we had 5 years expense needs in cash in high yield savings. Also a mix of long and short term bond funds (ETFs at vanguard) about 20% of total. My wife has a pension that meets about 1/2 of our expenses and we have 5 rental houses, so our situation is different… most everyone has their own unique circumstances. So find a blend that you can sleep good with and also understand. I was like eshannon12 and not impressed with stock market and bond market both tanking. But rode it out without panic selling.

If the Cash is Emergency Reserve/Sinking Fund, it's something like HYSA, investment grade bonds of that duration, SPAXX, etc.

If this is your investment portfolio, in early-mid Accumulation Phase, you don't want any Bonds. In late Accumulation you want to be transitioning into your Retirement Phase portfolio. The best Retirement Phase portfolio would optimize for "highest Safe Withdrawal Rate (SWR)", where #1 is the Golden Ratio Portfolio. The Golden Ratio Portfolio uses Long Term (or at least intermediate 20+ year) US Treasuries to get the desired non-correlation with the other held assets and mitigate for recessions.

We just use SGOV.

I use SGOV for 5% of my portfolio and VTIP for some inflation protection for 10% of my portfolio. The rest is in an 80/20 growth fund (AOA).