Cristina has a $1.2 million portfolio and hopes to make work optional within the next decade.
Is she invested in the right way? Or should she change up her asset allocation?

Anonymous and her husband plan to retire in 5 years. They have 10 rental properties and a $2.75 million portfolio. They dream of slow travel, generosity, and family time. How should they structure their assets to support the lifestyle they want?

Paula and her husband are planning for three kids, private school, and possibly college down the road. Should they front-load a 529 plan with a large lump sum, or take a different approach?

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Cristina: I’ve been reworking my portfolio. The Efficient Frontier talk got me thinking and overthinking. I built an asset allocation that looked solid on paper, but it didn’t feel right.

Here’s my snapshot: I’m 43 and hope to make work optional between ages 50 and 55. I have $750,000 in retirement accounts, $65,000 in emergency savings, and a paid-off rental worth $300,000 that nets about $950 a month.

I max out my 401(k) with the match – about $30,000 a year — and also contribute $30,000 annually to my brokerage. Altogether, I’ve got about $1.2 million in assets and no debt.

I modeled a three-bucket drawdown strategy and came up with a mostly serious, slightly spicy allocation. And this is what I want to run by you:

25 percent U.S. total market

20 percent U.S. value tilt

15 percent international high dividend

5 percent emerging markets

5 percent REITs

6 percent ARK funds (my “spice”)

24 percent bonds

I asked ChatGPT to role-play as you and give me feedback. Now I want the real deal. What do you think?

Anonymous: I’m 57 and semi-retired; my husband is 53 and hopes to leave full-time work in about five years.

We believe we’re invested along the efficient frontier. Our $2.75 million portfolio is about 58 percent large-cap growth, 16 percent small-cap value, 20 percent international ex-U.S., and 6 percent divided among individual stocks, REITs, and bonds. Roughly 98 percent of this sits in retirement accounts. We also have $80,000 in cash.

Beyond that, we own 10 rental properties worth about $2.1 million, with $1 million in mortgages. Seven of those have 5/1 ARMs at 7 percent, and three are on 30-year mortgages at 3.5 percent. Gross rents total $18,800 a month, with $12,400 going toward PITI and another 10 percent toward management. 

Our primary home is paid off, and our only other debt is a $35,000 car loan at 3.9 percent. At full retirement age, we’ll each receive a pension of $1,000 a month.

Looking ahead, we want to slow travel, spend a few months at a time in different places, give generously, and eventually stay near our daughter once she starts a family. We estimate our lifestyle will cost about $12,000 a month, and we expect to earn at least $4,000 from part-time work in retirement.

My husband is still contributing to his 401(k) up to the match, and we’re both funding a backdoor Roth and an HSA. On top of that, we can save about $3,000 a month. I’m torn on whether that money should go toward cash, bonds, or our current allocation. 

Here’s what I’d love your perspective on: how we should view our assets as a whole and how strategies like the Golden Ratio or All-Weather Portfolio might apply. And finally, I wonder if we should rebalance now to mimic the All-Weather Portfolio or wait until we’re closer to retirement.

Paula:  How much should I put into 529 plans for my kids’ education — and should I front-load contributions now or pace them over time?

My husband and I are expecting our first child, and we plan to have three kids. We want to send them to private school and then possibly public or private universities, so we know it’ll be a big financial commitment.

I’m trying to figure out how much to contribute to 529 plans. My Fidelity advisor mentioned I could front-load five years’ worth of gifts at once, which seems smart since the money would have more time to grow.

Right now, we have about $200,000 sitting in a high-yield savings account. It was originally set aside for property, but we’re rethinking that plan. I’m debating whether to move that money into 529s – or at least start with $90,000 when the baby’s born.

The challenge is there are so many types of 529 plans, all with different rules. I need one that allows $10,000 a year in withdrawals for private school, in addition to covering college expenses. We’re in California now, but may not stay here long term.

Can you share your thoughts on using 529s for both private school and college costs? And do you have any recommendations for the best 529 plans?

 

Resources Mentioned:
Interview with Frank Vasquez
Risk Parity Cheat Sheet
The All Weather Portfolio by Frank Vasquez
The Golden Ratio
Caller Christina’s original call
Afford Anything Episode 618 
Risk Parity Portfolio Blueprint 
Joe’s episode Stacking Benjamins 1698 
Run The Line half marathon with Joe
SavingForCollege.com

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During a bull market, most investors get excited about chasing risk. Despite sky-high valuations, there’s a tendency to double down on even riskier bets in the hopes of making outsized gains. That’s human nature. Nobody wants to miss the boat, and everyone thinks they can outsmart the market.

In the process, boring assets like risk-free Treasury bonds usually get pushed aside. After all, who wants to buy a government bond when you can try your luck with a private AI startup or the latest growth stock darling?

But here’s the thing: I’ve been investing since 1996, and I’ve lived through multiple boom-and-bust cycles. Just when you think you can’t lose, you sometimes lose big. And just when you’re convinced the good times will never return, the market surprises you with a rebound.

The real key to being a successful DIY investor isn’t finding the perfect stock—it’s having the discipline to maintain your asset allocation. If you can reduce your emotional volatility and stick to your investing plan, you’ll build far more wealth in the long run than if you’re constantly chasing FOMO.

And that brings me to a point that often gets overlooked: Treasury bonds can appreciate in value too. Don’t sleep on them.

Why Treasuries Deserve More Respect

In a previous post, I talked about how 20-year Treasury bonds yielding ~5% were attractive for retirees or anyone who’s already financially independent and doesn’t want to trade time for money. Google News even picked it up, but the reaction was lukewarm. Most readers weren’t interested—because it’s a bull market. When stocks are roaring higher, nobody wants to hear about bonds.

But as a semi-retiree and disciplined asset allocator, I find any risk-free return above 4% to be highly attractive. Think about it: I believe in the 4% safe withdrawal rate, even though at most I’ve ever withdrawn is 2%. If I can earn 4% on my capital without touching principal, I essentially guarantee myself lifetime financial security. That peace of mind is priceless.

It also means that if my kids end up getting rejected from college and can’t find jobs, they’ll still inherit plenty. Worst case, they can sit around playing video games in the paid-off homes I bought for them before they were born. Not ideal, but at least they won’t starve.

Because I practice what I preach, I bought $150,000 worth of 10-year Treasury bonds yielding 4.25% at the end of June on the secondary market. I’d love to lock up 30–40% of my taxable portfolio in Treasuries yielding at least 4%. That gives me a steady foundation of risk-free income, while still leaving 60–70% of the portfolio available for riskier investments like stocks.

For context, this taxable portfolio is what my wife and I rely on to fund our lives as dual unemployed parents. Stability and income are priorities. For me, that’s the ideal setup in retirement.

The Overlooked Free “Call Option” in Bonds

When most people think of Treasury bonds, they imagine clipping coupons and getting their principal back at maturity. And that’s exactly what happens—you earn steady income, and there’s zero default risk. That’s why they’re called “risk-free.”

But here’s what many investors forget: long-duration Treasury bonds come with a free call option.

If interest rates fall, the market value of your bond rises. You don’t have to sell, but you have the option to. That flexibility is powerful.

• Hold to maturity → collect coupon payments and get all your money back.
• Sell before maturity → potentially lock in capital gains if rates have dropped.

This makes long-term Treasuries a two-for-one investment: you get steady income plus upside potential if rates decline.

My Treasury Bond in Action

The $150,542 worth of 10-year Treasuries I bought in June 2025 are already worth about $154,529—a 2.64% gain in just two-and-a-half months as Treasury bond yields have come down. That’s without even counting coupon payments.

I made the investment during a similar time I invested a total of about $100,000 in Fundrise Venture, as part of my dumbbell investing strategy. The vast majority of the proceeds came from selling my old house at a profit.

These bonds pay a 4.25% coupon semi-annually. That’s about $3,199 every six months, like clockwork. I’ll keep getting those payments until May 15, 2035, when the bond matures and I get my $150,542 back in full.

Earning guaranteed money while doing nothing feels like a dream come true, especially now that I’m growing tired of being a landlord. I’m thankful to my younger self for diligently saving and investing 50%+ of my income for 13 years.

But let’s run some scenarios:

• Rates drop 1% (from 4.25% to 3.25%) over two years.
  My bond suddenly looks far more attractive. New buyers would only get 3.25% from a fresh 10-year, while mine pays 4.25%. The market adjusts by bidding up my bond’s price by roughly 6.5%. On $150,542, that’s ~$9,785 in gains. Add in two years of coupon payments ($6,398), and I’d be up around $16,183—a 10.75% return, risk-free.
• Rates rise 1% (from 4.25% to 5.25%) over two years.
  My bond would decline about 5.2% in value. That sounds bad for a risk-free investment, but here’s the plan: if I just hold until maturity, I still get all my coupons and my principal back. In the meantime, I’d happily buy new Treasuries at 5.25% to lock in even more passive income.

That’s the beauty of Treasuries. Either way, you or I win. Sure, there’s inflation to contend with. However, every investment contends with inflation to calculate a real rate of return.

Do note that you do have to pay capital gains tax for both federal and state if you sell before maturity and have a gain. However, interest is subject only to federal income taxes, not state and local taxes if you hold until maturity.

How Much Treasury Bonds Can Appreciate Per Interest Rate Decline

Here’s a look at how a 10-year Treasury bond (4.5% coupon, $1,000 face value) increases in value for each 25 basis point decline in yield:

• 25 bps decline (4.50% → 4.25%): $1,020 (+2.0%)
• 50 bps decline (4.50% → 4.00%): $1,041 (+4.1%)
• 75 bps decline (4.50% → 3.75%): $1,062 (+6.2%)
• 100 bps decline (4.50% → 3.50%): $1,083 (+8.3%)
• 125 bps decline (4.50% → 3.25%): $1,105 (+10.5%)
• 150 bps decline (4.50% → 3.00%): $1,127 (+12.7%)
• 175 bps decline (4.50% → 2.75%): $1,150 (+15.0%)
• 200 bps decline (4.50% → 2.50%): $1,174 (+17.4%)
• 225 bps decline (4.50% → 2.25%): $1,198 (+19.8%)
• 250 bps decline (4.50% → 2.00%): $1,223 (+22.3%)
• 275 bps decline (4.50% → 1.75%): $1,248 (+24.8%)
• 300 bps decline (4.50% → 1.50%): $1,274 (+27.4%)
• 325 bps decline (4.50% → 1.25%): $1,301 (+30.1%)
• 350 bps decline (4.50% → 1.00%): $1,329 (+32.9%)
• 375 bps decline (4.50% → 0.75%): $1,357 (+35.7%)
• 400 bps decline (4.50% → 0.50%): $1,386 (+38.6%)

In other words, if the 10-year Treasury yield falls to 0.6%—its all-time low in March 2020—your 10-year Treasury bond could increase in value by 35% to 40%. More realistically, if yields drop to around 3%–3.5%, you could see roughly 8%–13% in price appreciation on top of the regular coupon payments. Not bad!

Why Higher Yields Are a Gift

The higher rates go, the more excited I get. That may sound strange, but here’s why: I believe the long-term trend for inflation and interest rates is down.

Technology, productivity gains, global coordination, and lessons from past cycles all act as long-term deflationary forces. These should eventually bring interest rates lower. Further, with the Fed restarting its rate cuts, I’m not sure today’s 4% – 5%-risk-free yields may not be around forever.

This is why I’m buying now. Locking in these yields feels like a gift to my future self who might no longer want to lift another finger writing posts to help all of you build more wealth and live freer lives.

Beyond Treasuries, I’m investing more in real estate again as they act like a bond plus investment. In other words, real estate has more upside during a declining interest rate environment, while also providing some downside protection from stocks.

Stocks + Treasuries: The Golden Combo

Right now, investors have the best of both worlds:

1. A bull market in stocks.
2. Still high risk-free yields in Treasuries.

That combination doesn’t come around often. But when it does, it is a dream come true for anybody who is FIRE.

When I retired in 2012 with about a $3 million net worth, I felt content with that amount, so I logically said goodbye to long hours. Remember, you’re not really financially independent if you do nothing to change a suboptimal situation. At the time, the stock market felt dicey, and bond yields were ho-hum at 1.5% – 2%. Fast forward to today: the stock market is multiple times higher, and yields are more than double. Talk about a fortunate setup.

Let’s do a thought experiment. Suppose you’ve diligently saved and invested 50%+ of your income for 30 years. Now you’ve got a $10 million portfolio: $6 million in the S&P 500 and $4 million in Treasuries yielding 4%.

• Stocks at 7% return → $420,000.
• Treasuries at 4% → $160,000.

That’s $580,000 of income a year before taxes, on a $350,000 annual spending budget. You wouldn’t even have to touch principal. If there’s another 20% bear market, as there likely will be, your portfolio will only decline by about 11%. Over the long term, your net worth would just keep compounding until you pass away with far more money than you’ll ever need.

Don’t Underestimate Treasuries

It’s easy to dismiss Treasuries as boring compared to AI startups or meme stocks. But that would be a mistake. They provide steady income, reduce portfolio volatility, and—if rates drop—they can deliver meaningful capital gains.

They’re not flashy, but they don’t need to be. Boring is beautiful when it comes to financial security.

So the next time you’re tempted to overlook Treasuries, remember: they can appreciate in value too. Sometimes, the least exciting investments are the ones that quietly build lasting wealth.

Readers, what are your thoughts on investing in Treasury bonds yielding 4% or more? Do you believe inflation and interest rates are headed lower, or will they rebound higher? And were you aware that Treasuries can also appreciate in value—not just pay steady income?

Suggestions To Build More Wealth

If you believe interest rates will trend lower over the next several years—as I do—investing in bonds and real estate can make a lot of sense. Beyond Treasury bonds, you might consider Fundrise, a private real estate platform managing over $3 billion in assets for more than 380,000 investors. Its portfolio of residential and industrial commercial properties is well-positioned to benefit in a declining rate environment.

Listen and subscribe to The Financial Samurai podcast on Apple or Spotify. I interview experts in their respective fields and discuss some of the most interesting topics on this site. Your shares, ratings, and reviews are appreciated.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. You can also get my posts in your e-mail inbox as soon as they come out by signing up here.

Financial Samurai is among the oldest and largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.

DOWNLOAD the FREE Cheat Sheet: ASSET LOCATION MADE SIMPLE at affordanything.com/assetlocation

Jared is attracted to the favorable terms of the annuity plan that his employer offers, but he’s hesitant to pay the opportunity cost of locking up his money now. What should he do?

An anonymous caller is struggling to find the efficient frontier with only three funds to choose from in his Thrift Savings Plan. Is there any hope for him?

Jack feels great about the funds in his portfolio, but he’s losing sleep over how to apportion them between his taxable, pre-tax and Roth accounts. What’s the best tax strategy for him?

Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

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Jared asks (at 1:41 minutes):  Is it wise to lock up part of my portfolio now in exchange for guaranteed income decades down the line?

I’m 45 with a net worth of $1.5 million and a 92 percent allocation to stocks. I’ve been comfortable with the risk—didn’t panic-sell during the Spring 2025 volatility—and I haven’t felt the need to shift gears… until now. 

While looking into diversification options, I came across TIAA Traditional, which is offered through my employer. I understand this as a two-part product. First, I contribute now and receive a guaranteed minimum return of three percent, but in practice it’s often four to six percent. 

Then, later in retirement, I can convert that into a fixed income annuity—with an 8 percent conversion rate based on historical averages. TIAA seems well-regarded, and the guaranteed income appears more generous than what’s typically available from other providers.

Still, this isn’t your usual volatility-reduction tool like a bond fund. And while some guests on this podcast have spoken positively about the role of annuities in retirement planning, this is more complex than a straightforward annuity product.

So I’m wondering: should I invest in this now, locking in favorable terms and guaranteed income for the future? Or should I stay flexible, keep investing in growth-oriented assets, and consider an annuity closer to retirement—even if the terms aren’t as attractive down the line?

How should I think through this decision?

Jack asks (at 18:06 minutes):  My wife and I feel good about our asset allocation, but we’re getting tripped up on our asset location. Between a taxable brokerage, pre-tax or Roth account, how do we figure out which fund is best suited for each account?

We only invest in three main funds: domestic stocks through Vanguard Total Stock Market Index (VTI), international stocks through Vanguard Total International (VXUS), and a sizable position in Fidelity Blue Chip Growth.

Should VXUS go in the taxable account to take advantage of the foreign tax credit? Or does its lower tax efficiency mean it belongs in a pre-tax account instead? Should VTI be in the Roth since it might have higher expected growth? 

And then there’s the Fidelity Blue Chip Growth fund. My wife and I don’t want to sell it, but I realize it’s probably the least tax-efficient of the bunch. So if we want to keep it, does it make the most sense to try to shift it into a tax-advantaged account?

In short, how should we think about placing these three specific funds across our different account types to make the most of tax efficiency—while still honoring our preferences and keeping things simple enough to stick with?

Anonymous asks (at 34:13 minutes):How do I apply the efficient frontier when my investment options are limited? I’m a government employee using the Thrift Savings Plan (TSP). I’ve been struggling to merge the idea of the efficient frontier with the limited funds available to me.

I’ve experimented with different mixes, but I haven’t found a way to reduce risk without also reducing returns significantly. We have just a handful of options: a fund that tracks the S&P 500 (C Fund), a small-cap fund (S Fund), and an international fund that excludes China (I Fund).

Right now, I’ve got 60 percent in the C Fund, 20 percent in the S Fund, and 20 percent in the I Fund. That seems like a solid mix to me, but I want to ask—how would you evaluate these options to get as close to the efficient frontier as possible, given the constraints?

 

Resources Mentioned:

Article 34 : Gold Hedge Againt Sequence Risk

Everything You’ve Ever Wanted To Know About Annuities 

How Should You Invest 1 Million

Retirement Planning with Dr. Wade Pfau

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