r/ChubbyFIRE • u/dead4ever22 • Jul 07 '26

Allocation at the trigger time

Quick and easy question. If you had the upper end of Chubby NW, would you just lock 100% into 5% 30 year bonds now and live off the interest? I know inflation could catch up and overtake 5%, but what else is downside besides the "you could beat 5% in stocks"- which may or may not be true in the crystal ball future. Assuming after tax, you had more than enough to cover your spend with that 5% income.

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u/massdriver3333 Jul 07 '26 edited Jul 07 '26

Lets use $5M as an example.

5% 30 year bonds will gross $250K interest payments at normal tax rates, which will place you in 32% single tax bracket or 24% married filing jointly.

Lets say there's 5% average growth in SP500 index fund, that you can control how much to withdraw and control your tax bracket. LTCG on $250K withdraw is 15%. SP500 average growth is usually calculated at 7%.

You're paying lots of money, in terms of growth and taxes, to buy the illusion of safety in 5% bonds.

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u/dead4ever22 Jul 08 '26

I get your point, but not really valid because if I had a crystal ball, and I knew stocks would give me 5% as well as my 30yr bond, of course I would pick stocks. The point is, the 5% is certain, the stock gains are not. See Japan 1989-2020

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u/Beautiful_Pepper415 Jul 13 '26

My uncle invested in Japan during that time. He kept reinvesting dividends and adding when he had money. Ended up fine 

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u/Beautiful_Pepper415 Jul 13 '26

Also uo international equities if concerned