Well, friends and neighbors I finally threw in the towel. After a long and losing battle, I cashed out 3/4 of my Vanguard bond fund (VBTLX) to satisfy the remainder of my 2018 RMD. It was painful to watch the fund sink in value while my IRA CDs just kept clicking along. I admit I was warned by Poster Me1004 not to go there (i.e., into VBTLX) in a rising-rate environment.
A 2% five year CD is worth the same as a 4% five year CD.
As for buying individual bonds instead, so as to be able to hold them to maturity and get the stated return, as opposed to a mutual fund that is buying and selling all the time, that would work if handled in that way to avoid that one issue. But it simply adds other issues, of higher risk, especially from the lack of diversity a mutual fund provides, and less liquidity since you must hold them, as you would have to hold the bond all the way to maturity to be assured of getting the contracted return. And if you want the good rates, you have to take longer term bonds. The longer the term, the higher the risk, as if the bond issuer goes bankrupt, you could lose everything. You might be very unhappy now if you had bought a 15-year bond issued by Sears 10 years ago.
