Can a TIPS Allocation raise my Safe Withdrawal Rate? – SWR Series Part 66

October 19, 2026 – Welcome back to a new installment of the Safe Withdrawal Rate Series. Please check the Series Landing Page. Today’s topic is an update on a post I published in 2024, Part 61, Safety First, where I examined whether a significant shift into (relatively) safe financial instruments and asset classes, single-premium immediate annuities (SPIAs) and inflation-protected Treasury bonds (TIPS), can improve my retirement safety. The verdict back then was mixed: For early retirees with long horizons, TIPS didn’t offer much security at the real rates prevailing in 2024, and annuities carry significant inflation risk. We’ve come a long way since 2024; TIPS real rates have risen significantly, and one of the most requested topics recently has been whether today’s impressive TIPS real rates, north of 3% for the 20- and 30-year maturities, warrant a second look.

Let’s get started…

What are TIPS?

Before we get started, let’s first make sure we’re all on the same page. TIPS stands for “Treasury Inflation-Protected Securities.” They are bonds issued by the US federal government that pay a guaranteed real interest rate, in contrast to regular Treasury bonds that pay nominal interest only. As a result, TIPS pay coupon payments, and the bond’s notional value rises with the Consumer Price Index (CPI). Future real interest payments also rise as the bond’s notional value increases, and at maturity you receive the (inflation-adjusted) notional value, i.e., the initial value adjusted by the US CPI.

Ex ante, with mostly efficient markets and intelligent market participants, there shouldn’t be any arbitrage opportunity. In other words, the yield difference between nominal bonds and TIPS with otherwise equal characteristics (maturity, creditworthiness) must be roughly the inflation rate financial markets expect over the lifetime of the TIPS. In fact, the rate differential between nominal bonds and TIPS with the same maturity is commonly used as a gauge for market-implied CPI inflation expectations. We call that the “break-even inflation rate,” i.e., at this inflation rate, the three variables, nominal rate i, real rate r, and inflation rate pi satisfy the Fisher Equation:

… for small enough nominal and real interest rates. And if we look at the time series chart of this break-even inflation rate, it’s been hovering at around 2.25% for the last few years. That seems like a reasonable inflation forecast for the next 10 and 30 years if you believe my former employer, the Federal Reserve, does its job. Of course, if you believe that inflation will be materially higher than that, you’ll definitely prefer the TIPS route over nominal bonds. But most rational market participants seem to believe there is no arbitrage between TIPS and nominal bonds and CPI will be slightly above 2% going forward. Also note that, historically, the breakeven inflation rate has fluctuated wildly: during recessions, it normally drops precipitously. This raises a market-timing idea: during a recession, ride the duration effect in nominal bonds, and when the breakeven seems unrealistically low, say below 1%, shift into TIPS, but that goes beyond the scope of today’s post.

How to implement TIPS: ETFs vs. TIPS bonds vs. TIPS ladders

There are different routes to get exposure to TIPS. I list them below, together with the pros and cons:

1: TIPS ETF

Just like for any other asset class/sub-class/style, we have a decent selection of relatively low-cost ETFs. From the major providers, we have VTIP (Vanguard), SCHP (Schwab), TIP (iShares), and STIP (also iShares, but shorter-maturity TIPS, only 0-5 years).

Pros:

• Easy to trade in and out, even in small quantities.
• Likely zero or low commissions and very low bid-ask spreads.

Cons:

• The ETF prices are subject to fluctuations. Specifically, if real rates change, you’re still subject to a duration effect in TIPS, just as nominal bonds fluctuate when nominal yields change. More on that below.
• Some ETFs have sizable expense ratios: iShares TIP: 0.18%. Vanguard’s VTIP and Schwab’s SCHP have the most competitive cost at 0.03% p.a.
• The ETF returns were not materially different from nominal bond ETFs since 2004. More on that later.

TIP’s current distribution yield is 4.71% as of 10/16/2026.

2: Individual TIPS Bonds

Pros:

• No expense ratio.
• You get real cash flow, guaranteed over the bond’s lifetime.

Cons:

• The cash flow is very uneven: relatively modest interest payments (smaller than those from a nominal bond of comparable maturity), but then one large payment to return the principal and accumulated CPI adjustments upon maturity.
• In the secondary market, TIPS bonds could be cumbersome and expensive to trade. New issues are available through TreasuryDirect, which lowers the cost of purchasing TIPS, but the TreasuryDirect website has its own issues. Large brokers may offer zero commissions, but bid-ask spreads may be large.

To manage uneven cash flow, retirees might want to buy not just one TIPS bond but a ladder of bonds to create a CPI-adjusted paycheck, which brings me to the next option…

3: TIPS Ladder

Building a full TIPS ladder is more complex because we need to choose which individual bonds to buy to match cash flow needs over time. Conceptually, that’s relatively easy; I’ll illustrate with a numerical example; see the chart below. You purchase a bond expiring in the last year. The notional would be the cash flow need divided by (1+r), so that the notional repayment and interest exactly match your need. Next, you go to the second-to-last year. Your bond from the first step generates interest in that year, so you need to cover slightly less additional cash flow. You buy bonds worth that remaining flow divided by (1+r) for that year, and so on. In the end, you’ll have a payment stream that precisely matches your cash flow needs. Sweet!

Pros:

• We can generate any cash flow pattern we like, including a (mostly) flat cash flow without big balloon payments in the end.
• A wonderful free website, TIPSladder.com, helps you build a ladder from scratch. You enter your cash flow needs, the horizon, etc., and the site spits out a recommended buy list (i.e., which CUSIP to buy and in what quantity), plus other useful stats, such as the duration and real IRR of the TIPS portfolio.

Cons:

• For some retirees, TIPS bonds might not be “granular” enough. If you buy them in the secondary market (i.e., in your brokerage account), you can only buy in $1,000 increments. And sometimes not even that, which brings me to the next point…
• Tracking secondary market bond prices and getting the sizing right is cumbersome. Just like for any other bond, TIPS prices change with real interest rates (so TIPS can trade above or below par just like nominal bonds), but the definition of par also changes with CPI adjustments. So, a 2036 TIPS bond issued in 2006 may trade at par, but par isn’t $1,000. Instead, it is $1,000 in 2006 dollars, so we need to add 20 years of CPI adjustments, probably around $1,600. If you want to buy $100,000 worth of TIPS bonds, don’t blindly buy 100 bonds, or you might get the sizing wrong! To be sure, the TIPSladder.com site will do the calculations for you.
• Gaps exist in the TIPS maturity structure: we have no maturing bonds in 2037, 2038, or 2039. Workarounds exist, and the TIPSladder.com site I mentioned above can help; for example, buy bonds that expire in the earliest year after the gap and liquidate them early a few years later, with modest uncertainty about the exact price you will get.

What can possibly go wrong with TIPS?

One reason TIPS can disappoint is that there is no free lunch. I looked at return data for the TIP ETF (iShares TIPS) and IEF (7-10 year nominal Treasury bonds) since 2004, and the two ETFs are significantly correlated. The TIP fund slightly outperformed the nominal bond fund, but not by much. Another major disadvantage of the TIP ETF: during periods of economic stress, such as the global financial crisis in 2008/9 and the pandemic shock in 2020, only nominal bonds rallied, while TIPS sank in early 2009 and lagged nominal bonds during the 2020 recession. Of course, TIP eventually caught up with IEF again, but using TIP instead of IEF in a 75/25 portfolio would have provided less diversification.

Thus, the TIP ETF was less useful for diversifying equity risk. If you put the bond funds into a diversified 75/25 portfolio, performance was almost identical whether you used 25% TIPS or 25% nominal bonds. So, historically, adding TIPS to our retirement portfolio through the ETF route likely won’t move the needle much in SWR simulations; more on that below. Also notice that over this current decade, TIP had a measly 1.87% annualized nominal return, or -2.04% real. That’s better than its nominal counterpart (-0.64% nominal and -4.46% real p.a.), but it’s still not exactly a great inflation hedge either. The best inflation hedge in the post-pandemic inflation scare was the S&P 500! (Side note: OK, maybe the S&P was only second-best, with the Nasdaq taking the trophy, but that’s a story for another time!)

Taxation could be a hassle in (at least) two ways. First, most retirement savers I know will have an equity-heavy portfolio while accumulating. How do you reshuffle this portfolio into TIPS upon retirement? In taxable accounts, it will likely not be worthwhile to incur massive taxable capital gains to shift into TIPS. Most retirees will probably want to shift only assets in tax-deferred accounts (i.e., IRAs, Roth IRAs, etc.).

Second, even if you could easily shift assets into TIPS, they pose another headache in your taxable accounts. That’s because the real interest payments are taxable every year, and so are the CPI adjustments to the principal. So even though you don’t receive the notional increase until the bonds mature, you still have to pay tax on those gains along the way. How unfair! With my equity investments, I don’t pay tax on unrealized gains. However, with TIPS, because the government guarantees the notional adjustments, they are taxable income every year. This quirk can create really unappetizing tax bills. Imagine a retiree shifted his/her entire $5,000,000 in a taxable account into TIPS and gets a 3% real return. Nice, that’s $150,000 a year and a pretty rich retirement budget. Even after paying taxes. But wait, what if you encounter a nasty inflation shock that year, with a 10% increase in the CPI? You will get a tax bill for $650,000, i.e., the $150k in real interest income plus the $500k nominal adjustment. According to NerdWallet’s tax estimator (married filing jointly, using the standard deduction), you’ll be in the 35% tax bracket and will pay $ 153k in federal income taxes, more than the annual interest payment. Even if CPI is more normal, say 2.5%, you pay income tax on $275k of income ($150k of interest plus $125k of CPI adjustment), so about $43k. Your 3% annual real yield drops to about 2% after tax. But note that you don’t pay state income taxes on TIPS income. That’s irrelevant to retirees in states without an income tax (FL, TN, TX, AK, WA, NV, WY, SD), but retirees in Oregon, California, and other states with potentially high marginal tax rates might consider this feature.

Finally, one concern is government meddling with the CPI calculation. True, this is probably tin-foil-hat conspiracy-theory territory, but with growing debt burdens and tight government budgets, I wouldn’t completely rule it out. The government wouldn’t save much money from TIPS bonds by underreporting CPI by 0.5% or 1% a year, because the TIPS market is relatively small. The far bigger incentive would come from both Social Security inflation adjustments (COLA) and the CPI-adjusted parameters in the progressive tax system, where underreporting CPI would push more folks into higher tax brackets. I hope that this wouldn’t happen here. But precedents of governments fudging inflation data are plentiful: Argentina, Chile, Turkey, Venezuela, and Zimbabwe, to my knowledge.

Simulations with TIPS

As usual, I like to simulate two scenarios: 1) the typical traditional retiree with a 30-year horizon and asset depletion, i.e., zero final assets as the success criterion, and 2) a FIRE scenario with a 50-year horizon and only partial asset depletion, i.e., the retirees like to keep an inflation-adjusted 25% value of their current portfolio as their final portfolio value to serve as a cushion and/or bequest target. Version 2 is roughly what I target in my personal situation.

TIPS ETF replication

Let’s start with the easiest TIPS implementation and compare two portfolios, both with 75% large-cap stocks, one portfolio with 25% nominal bonds and the other with TIPS. For the TIPS returns, I use a spliced data series: the actual TIP ETF returns since 2004, and an estimated factor model before 2004. I used a similar technique in the previous post (SWR Series Part 65), where I had to fill in the early return data for Bill Bengen’s new retirement portfolio. I look at the factor model output (you can find these data in the Google Sheet, tab “ETF Factor Exposures” for over 230 ETFs, mutual funds, and stocks). First, note that even the IEF isn’t exactly a 100% 10-year benchmark bond. It captures slightly negative exposure to the 30-year bond, a symptom of its shorter duration, since the IEF uses bonds with 7-10 years to maturity. The TIP ETF has even less exposure to 10Y bonds and also captures other factors: about 11% of combined equity beta (US and international), plus commodities and gold, which clearly captures the inflation hedge. These slope parameter estimates are quite intuitive!

1) 75/25 portfolios: how much will a TIPS ETF help?

Let’s check how my toolkit simulations compare if we replace the 10-year bonds with a TIPS ETF. To this end, I copied the TIPS returns (simulated before 2004, actual TIP returns thereafter) into the Custom Series in my Google Sheet. The TIPS series already includes the expense ratio, so I set its expense ratio parameter in my Google Sheet to zero.

Before we look at the safe withdrawal rate simulations, let’s review the return stats first; see the table below. The return stats are almost identical. A 75/25 portfolio with nominal vs. real bonds will differ by only a few basis points (0.01%). Worse, the TIPS ETF will also raise portfolio risk and both equity correlations and betas across all subperiods. So, let’s not get our hopes up: don’t be too disappointed if the TIP ETF doesn’t materially change your safe withdrawal rates!

Let’s compare safe withdrawal rates by decade for the four scenarios: two retirement horizons and two portfolios. See the table below! Including the TIPS ETF has no material effect on the historical withdrawal rates. If anything, retirement performance slightly deteriorates. For the traditional retiree, the 1960s ($38,180) were the fail-safe, but very closely followed by the 1920s ($38,367). Including TIPS makes the 1960s slightly better but the 1920s slightly worse, for a net loss in the fail-safe withdrawal amount. That’s intuitive: TIPS did well during the inflationary 1970s, but nominal bonds would have outperformed TIPS during the deflationary 1920s and 1930s.

Likewise, in the FIRE retiree (50 years with a modest bequest target), you significantly reduce 1920s performance for the same obvious reason: TIPS didn’t help you during the deflationary Great Depression! Nominal bonds did much better.

Well, that wasn’t too impressive. But wait, there is hope! The TIPS ETF simulations miss that TIPS rates are currently much more attractive than they likely would have been historically. So, why do I care about how the TIPS ETF would have performed in 1937 (subject to a lot of modeling uncertainty, by the way), when we have today’s TIPS rates to work with? That leads me to the next section…

2) TIPS bonds and ladders

Let’s now model both individual TIPS bonds and TIPS ladders using today’s rates. For the TIPS bond, I assume our retiree considers a 30-year bond with a 3.17% real interest rate, according to Bloomberg, as of October 16, 2026. For the TIPS ladder, I assume the retiree has access to a range of TIPS bonds available as of October 16, 2026. I took a screenshot from the TIPSladder.com site and found that to secure a $100,000 (average) annual real income, you’d have to spend just under $2,000,000 today to purchase the entire 30-year bond ladder. You can choose a few parameters, and they all generated costs between $1.969m and $1.980m for the TIPS ladder today. So, in my simulations, I assume that for every $1,000 in guaranteed TIPS ladder income for 30 years, I’d need to convert $19,800 into TIPS today. That’s amazing, because that’s a 1/19.8 = 5.05% guaranteed withdrawal rate over 30 years.

Of course, this 5.05% withdrawal rate has one major drawback: you have zero upside! If you live 31 years, you’d be destitute, while traditional Bengen/Trinity-style simulations hedge the worst case but leave substantial excess funds after 30 years, sometimes more than the starting portfolio value!

To study the trade-offs between hedging the worst case and keeping some upside potential, I use the following six scenarios for our traditional retiree with a 30-year horizon. In each scenario 2-6, I optimize the failsafe withdrawal rate, though subject to different constraints. Specifically, I optimize the TIPS allocation and the allocation across the non-TIPS portfolio (Stocks, 10y bonds, 30y bonds, TIPS ETF, and Cash/Money Market):

1. The baseline 75/25 portfolio with nominal bonds. No TIPS ETFs, bonds, or ladders. The initial portfolio is $1,000,000, and the horizon is 30 years.
2. TIPS, all-in: Well, to model this in the SWR toolkit, I can’t set the initial portfolio value to $0, because this would trigger a division-by-zero error. So, I constrain the TIPS investment to be at most $999,000 and the remaining financial portfolio to be at least $1,000.
3. Obviously, the allocation in portfolio 2 would leave very little in the final portfolio. Thus, I assume our retiree is still OK with depleting the portfolio in the worst case but wants to retain 50% of the initial portfolio at the median of the final portfolio value distribution, conditional on a CAPE above 20 in the initial month.
4. Same as Scenario 3, but now let’s target $1,000,000 for the median of the final value distribution.
5. Same as Scenario 4, but let’s assume our retiree has $500,000 in highly appreciated stocks in a taxable account. So, we have the additional constraint of maintaining that equity allocation in the non-TIPS portfolio.
6. Same as Scenario 5, but I assume the TIPS rates are much lower: the standalone 30-year TIPS has a real rate of only 2.25%, and the TIPS ladder is more expensive and only affords you a 4.5% safe withdrawal rate (equivalent to a 2.12% IRR of the TIPS ladder, about a whole percentage point less than today’s rates. I want to check how much is left of the TIPS route if rates ever “normalize” again (then again, maybe TIPS rates are normal today)

Let’s look at the simulation results:

1. This is the typical Bengen/Trinity/ERN-style result: You get a slightly below 4% failsafe. The roughly 3.82% rate occurs twice, once in 1929 and once in 1968. Even though the worst-case scenario leaves you with nothing after 30 years, there is massive upside potential: even conditioning on the CAPE above 20, you’d still have 1.6x your portfolio after 30 years at the median of the final distribution.
2. All into a TIPS ladder (well, at least 99.9% in, leaving a small financial portfolio cushion) gets you a roughly 5.05% safe withdrawal rate. It’s as flat as it gets throughout the decades because you have essentially no financial portfolio. You also wipe out your portfolio with precision; the median final value is just under $1,500. This all affords you a 32.25% richer retirement budget!
3. To guarantee a comfortable $500k cushion in the end, you need to maintain only about $145k in the non-TIPS portfolio, invested almost entirely in equities (98.1%). You’d still do a massive shift into the TIPS ladder: over $855k. The failsafe didn’t deteriorate much: It’s still 47,443, so 4.74%. This is 24.26% higher than in the benchmark.
4. If you want the median final value to be 100% of your initial portfolio, you would still transform more than two-thirds of your portfolio into the TIPS ladder. You’d again keep an almost all-equity portfolio. The failsafe is now down to $44,352, or about 4.44%. This is 16.16% better than the benchmark
5. Requiring the $500k minimum equity portfolio severely hampers your TIPS conversion options. Sure, you could still transfer $500k into a TIPS ladder, but that would leave you with a $500k all-equity portfolio, which apparently would be too risky. So you’d instead keep a diversified portfolio (72.7% stocks, rest bonds and TIPS) and transfer only $312k into TIPS. You get an improvement of about 11% in your retirement budget, all while maintaining significant upside to your portfolio in the end.
6. Same as scenario 5, but with lower TIPS yields. The TIPS ladder is now $263k. You use a 68% equity portfolio; the rest is mostly in TIPS (23.5%) and nominal bonds (8.4% combined). The failsafe is now $40,743, or 4.07%. That’s 6.71% more than in the benchmark.

Notice that none of the scenarios called for any investment in the single 30-year TIPS bond. The optimal allocation to maximize the failsafe would only seek the TIPS ladder! This makes sense: a large payoff in year 30 is less useful if you strive to maximize the failsafe with zero final value.

What I find amazing is that with today’s TIPS rates, even in the most cautious setup, you can increase your retirement budget by over 10%. That’s impressive, and it’s a bigger boost than a reverse glidepath, where you can squeeze out about 7% extra.

For the 50-year retirement with a 25% final value target, I go through the following progression of scenarios:

1. The baseline 75/25 portfolio with nominal bonds. No TIPS ETFs, bonds, or ladders. The initial portfolio is $1,000,000, with a 50-year horizon.
2. Add the single 30-year TIPS bond to the mix (but not yet the TIPS ladder).
3. Add the full 30-year TIPS ladder to the mix.
4. Require a minimum $250,000 financial portfolio.
5. Require a minimum $500,000 financial portfolio.
6. Require a minimum $750,000 financial portfolio and a $ 500,000 equity portfolio.
7. Same as scenario 6, but with lower TIPS rates.

Let’s look at the simulation results:

1. You get a 3.23% failsafe. This time, the 1900s, 1920s, and 1960s are the close competitors for the worst-case scenario. Even though the worst-case scenario leaves you with nothing after 30 years, there is massive upside potential: even conditioning on the CAPE above 20, you’d still have 3.86x your portfolio after 30 years, based on the median of the final distribution.
2. Adding just one TIPS bond won’t do much: Even though I set the upper limit of TIPS exposure at $999,000, it’s optimal to buy only about $20k. The portfolio shifts down to 63% stocks, 13% 10y nominal bonds, 9% TIPS, and 15% cash. The failsafe withdrawal amounts don’t change much, only about 1.18% higher overall and 0.52% higher post-1926. Not much to see here!
3. Adding the TIPS ladder option has a massive impact on your retirement finances. The retiree would shift almost $882k into the TIPS ladder, while the 30-year TIPS bond remains unutilized. That’s intriguing: the $999,000 upper limit remains unused. The remaining $112k of portfolio value is all in an equity portfolio. With this move, the retiree would have created a massive +25.94% in the retirement budget since 1900 and an even more impressive +34.17% in the post-1926 era. Specifically, the safe withdrawal rates are 4.07% overall and 4.36% post-1926. Also noteworthy: you don’t give up much of the upside. The median final value would have been almost 2x the inflation-adjusted initial amount. What’s intriguing is that the TIPS ladder in this optimized solution is overfunded, i.e., the cash flow from that ladder exceeds the failsafe withdrawal amount. So you create a new dollar-cost-averaging machine: use the $112k initial stock portfolio and add more every month until year 31 of your retirement. Sequence Risk solved!
4. The next scenario restricts the equity portfolio to above $250k, say, because highly appreciated stocks are in a taxable account. Again, the optimal portfolio asks for 100% equities in the non-TIPS financial portfolio. The failsafe withdrawal rate is still 3.985% for all years and 4.09% for post-1920 cohorts, translating into a quarter more
5. When you need at least $500k in your equity portfolio, your TIPS ladder will be $411,680, with the remaining portfolio 85% stocks and 15% 30-year nominal bonds. This move gives you roughly an 11- 12% higher annual retirement budget.
6. If we further constrain the total non-TIPS portfolio to $750k, we’re now looking at a $250k TIPS ladder, $750,000 in the remaining portfolio, allocated to 72.3% stocks. This move affords you a 7.28-7.98% higher retirement budget.
7. Finally, with lower TIPS rates, some of the advantage disappears: you expand your retirement budget by only 4.33% in the 1900s and 3.65% in the post-1920 cohorts.

Again, these results are very impressive. At today’s rates, even with a conservative assumption that we move only a quarter of the portfolio into a TIPS ladder, we can pull off a 7% boost to the retirement budget. About the same ballpark as the reverse glidepath.

Also, in all scenarios, you would have maintained pretty strong upside potential for the final portfolio value. That’s because targeting $250,000 in the worst case means you get sizable final portfolio values in the not-so-bad cases, thanks to 50 years of compounding! So, over the longer horizon, only the initial portfolio size and unrealized equity gains in taxable accounts pose any true constraint on the TIPS ladder conversion!

Conclusion

People have come up with all sorts of wacky solutions to Sequence of Return Risk. Like this one I found on Reddit the other day:

Thus, as always, I started this project with a great deal of skepticism. I looked at the TIP vs. IEF performance and thought that was it; there was no more work to do. What’s more, after the last few blog posts, shooting down the Bill Bengen small-cap stock approach in Part 65 and taking the even more offensive and idiotic Risk Parody, uhm, Risk Parity approach to the woodchipper in Part 64, I wasn’t really in the mood to write another post about a “negative result.” It would give more fodder to the trolls and haters who often falsely accuse me of just running a “hit job factory” on my blog. But that’s not true: I’ve written positively about gold, reverse glidepaths, trend-following/momentum strategies, and options trading for supplemental income in retirement.

Today I can add the TIPS ladder to the list of ERN-approved retirement safety enhancements, at least in today’s TIPS rate environment. Specifically, I was pleasantly surprised by how well a carefully modeled TIPS ladder works. It’s crucial to never treat the TIPS route as a zero vs. one decision (i.e., no TIPS at all vs. all all-in TIPS). We should simulate the TIPS ladder as part of your overall financial asset portfolio, something that, to my knowledge, only my SWR Toolkit can do properly. Of course, even with my toolkit, it took some hacking, i.e., downloading the Google Sheet into Excel and running the solver/optimizer there.

The strength of a TIPS ladder in today’s environment comes from its ability to support a 5+% safe withdrawal rate over 30 years, at least with current real rates hovering slightly above 3% for 20- and 30-year TIPS. To my knowledge, no other approach can guarantee that kind of (inflation-adjusted) initial withdrawal rate. Of course, some charlatans will push artificially boosted SWRs through hindsight bias, e.g., tying retirement to a rebound in the long-gone small-cap value-stock alpha premium from the 1930s and 1970s. But that’s wishful thinking by some ditzy internet trolls. In contrast, TIPS enjoy an actual government guarantee.

Sure, the TIPS ladder has the disadvantage of zero upside, while the Bengen- or Trinity-style failsafe rate will have lower failsafe amounts but far better outcomes in less-than-worst-case scenarios. Retirees should consider only partially converting to a TIPS ladder to keep enough of the upside while maintaining a safe withdrawal rate well above 4%. The partial TIPS ladder conversion may be the preferred route anyway because of the tax planning constraints mentioned above.

But the 5% SWR over 30 years, even with depletion, also helps you in longer retirements! I was surprised by this feature. I previously often dismissed the TIPS approach because TIPS only go out to 30 years, so you’d face reinvestment risk after the 30-year mark, and I suspected we shouldn’t use TIPS in that case. But today’s post confirms that 30 years of TIPS can still help you with a 50-year retirement. It’s almost like you create a “fresh shuffle” in the Sequence of Return Risk deck by shifting a large portion of your portfolio into a TIPS ladder and keeping the rest in equities. Today is not a bad time to do so, given the nosebleed-high CAPE ratio: 39.58 with Shiller’s methodology and 35.44 with mine, as of 10/16/2026, with an S&P 500 close of 7,659.44. You’d effectively create a fresh 30-year buy-and-hold portfolio with 100% equities (or potentially even contribute to that portfolio if your TIPS ladder income is higher than the annual budget), and thus completely hedge away the risk from today’s elevated equity valuations.

But alas, not everyone can pull off that portfolio switcheroo from significantly appreciating equities into TIPS. Most people I know have most of their portfolio in taxable accounts. TIPS create too much of a tax headache, both when shifting funds from equities to TIPS upon retirement and an ongoing tax drag during retirement. Most retirees will benefit from a TIPS ladder in a tax-advantaged account only. Finally, there is no guarantee that real rates will stay high. A TIPS ladder would be less attractive if rates declined again into the low-2% range or below. But TIPS certainly look like an attractive opportunity at today’s rates.

Please leave your comments and suggestions below! Additionally, be sure to explore the other parts of the series; see here for a guide to the different parts so far!

Title Picture Credit: WordPress AI + ERN edits

Technical Appendix

The Google Sheet link is here. It has the TIPS ETF return series.

I downloaded the Sheet as an Excel File and used the MS Excel Solver function in the tab “Cash Flow Assist.” You can check out the file here. All simulation results are in the tab Sim Results. Notice that modeling the TIPS investment in the Cash Flow Tab requires some additional fine-tuning of the formulas. For example, if we have a final value target, you need to adjust the target in the Excel Sheet. If you divert $250k from the portfolio and need $250k at the end, that’s now 1/3, not 25% of the non-TIPS portfolio.