56m 10 years from retirement
I am 56, and would like to retire in about 10 years. I thought I was comfortable with my portfolio, which is a fairly standard mix of stock index funds and bond funds (68/32 stocks to bonds/cash), but I have found that I’m stressing about the 10 year time horizon now that it’s here. With stock valuations and all of the other negative news, I fear a lost decade or major correction, etc.
I have around 700k in a 401k, and I am considering this: buying around 600k in strips or zero treasury bonds at 5+% and investing the balance in a no/low cost s&p index fund available within my 401k. All future contributions would go into the 68/32 mix described above for longer term investing during retirement. The strips will be 1mil in 10 years and the balance plus future contributions could be another 500k. Along with 6k per month in SS (combined with my wife’s) the million at a 4% withdrawal rate should provide enough to cover COL comfortably.
My main question is, what are the downsides to buying the strips given the historically high yields?