Vanguard Short-Term Corporate Bond ETF

VCSH

Market cap $42.5B

Tony Dong is the founder of ETF Portfolio Blueprint.

One of the unique aspects of US citizens from recent history is that, apart from the Bidenomics fueled 17% cumulative inflation and the 48.6% cumulative inflation under Jimmy Carter, most of them have not experienced the rationing and Depression-aftermath scarcity that preceded World War II.

The most important takeaway as you learn about these three Vanguard funds is that there is no exotic strategy, just three well-known funds, one brokerage account, and an allocation specifically designed around current yields to produce around $4,262 per month in income off a $1.4 million portfolio, without selling one single share.

Most retirees who end up with a workable income portfolio did not engineer it from scratch.

According to conventional thinking, a retiree with $500,000 looking to withdraw 4% annually through the gradual selling of shares is hoping that the math holds up for the next 30 years.

Nobody handed Sue a pension, and after decades of working at the same elementary school administrative office, she retired with a 401(k), a Social Security check, and a decision about how to turn her savings into something that feels like a paycheck.

The 10-year Treasury sits at almost 4.4%, the Fed funds upper bound is parked just under 4%, and the 2-to-10 spread has compressed back to about half a point.

Most retirees building income portfolios gravitate toward the same handful of names: dividend ETFs, money market funds, maybe a broad bond fund.

Both ETFs charge the same low expense ratio, but VCSH offers a higher yield than BSV. VCSH has delivered stronger one-year and five-year total returns, though BSV has seen a slightly smaller maximum drawdown.

Despite rate interest cuts, long-term bond yields have remained steady. With inflation risk rising, the outlook for the bond market is in doubt.