Steve,

YW.

I understand your retirement withdrawal strategy, and have a few questions.

First, I assume your 2.8% rate of withdrawal is 2.8% of the current value of your whole portfolio, and that you want that amount of money to increase each year, with inflation.  That is, the 2.8% is a real, rather then nominal, rate, yes?

If you want your whole portfolio to produce a real 2.8% income stream, then 2/3rds of it will have to produce 4.2% of its value, while the remaining 1/3 could produce no income, yes?  That is, you understand traditional and current thought regarding a real, inflation adjusted 4% rate of withdrawal during retirement.

Let me suggest, as an yield income focused retiree (5 years now) that your goals are quite modest.  Let me also suggest that a different M* forum (Income and Dividend Investing) would be a better place to discuss this.  Nevertheless, I'll give my thoughts here.

Let me next suggest (and I think you understand this) that, if your income bucket could be set up to yield 4.2%, or more, your withdrawal requirements above can be met.  Simply put, if the overall weighted yield of your portfolio is 2.8%, or more, you can withdraw, and spend, that amount, without touching principal.  That is, your principle becomes your estate.

(The overall weighted yield is calculated by taking 2/3rds of 4.2% plus 1/3rd of 0%.  If your portfolio is complicated, that is, many funds, individual stocks, individual bonds, if you put it into the M* portfolio manager tool, it will calculate the overall weighted yield.)

As to your questions:

"1. Have there been studies I could read on income-stream portfolios comparing streams and outcomes of (a) directly owning bonds vs (b) bond mutual funds vs (c) laddered CDs, or (d) combinations of these?"

I have seen strategies using individual bonds and bond ladders, where the various rungs provide yearly income (Scott Burns, from the Dallas Times, did one a decade ago).  John Walter Russell (JWR) (post on the above forum to get his attention) uses individual TIPs for accumulation of excess yield generated, but not spent.

I believe I understand the reason your have posed this question, so correct me if I am wrong.  You must be familiar with the traditional safe withdrawal rate studies that show even a 4% rate of withdrawal has a very small chance of failure, and those studies typically use a bond index fund for the debt(income) portion of one's portfolio.  You are asking whether going to individual debt instruments can improve the odds of success.

JWR can answer that question, since he is quite versed on why traditional portfolios fail during retirement withdrawals.  Specifically, using funds, and selling assets to fund withdrawals, can lead to failure whenever fund NAVs fall, and you are forced to sell.  Using individual bonds, and holding them to maturity, guarantees that you receive full value for the bond.

Let me ask you to consider something.  If you set up your portfolio, such that it's overall weighted yield is 2.8%, or more, then the yield of your portfolio will always fund your withdrawals.  If so, you will never be forced to sell anything, in order to fund those withdrawals.  If not, you become immune to fund NAV behavior, as well as the total value of your portfolio!  That is, the value can fluctuate over time, but the yield thrown off will be steady.

The 'failure mechanism', in this case, is if the yield distributions of your funds decrease over time.  Furthermore, you can guard against this by setting up your portfolio such that it's overall weighted yield is greater then needed to fund those withdrawals!  And this, basically, is what I, JWR, and several other yield focused investors do.

The advantage of doing this is that you do not need to get into all of the complicated aspects of owning individual bonds (the subject of your thread!)  For example, Vanguard has a total of 14 taxable bond funds (Investor level).  Of these, 9 have current SEC yields greater then the 4.2% that you need, and that doesn't include their Inflation Protected Securities fund.  Likewise, there are a few other balanced funds at Vanguard with yields above that leve.

Let me suggest that you can construct the income portion of your portfolio from these funds, such that the weighted yield of this part of your portfolio is greater then 4.2%.  If you withdraw, and spend, that 4.2%, but reinvest whatever excess yield is generated above and beyond that 4.2%, the excess yield is purchasing more shares, each yielding more then 4.2%.

As such, this income stream will most probably increase over time, as you buy more and more shares.  It is possible, of course, that the yield distributions will decrease.  At any rate, you can examine the previous distribution history of each of these funds, and play with the results.

I would suggest that this is a more fruitfull task then examining bond ladders!

Oh, and if the 'growth' side of your portfolio (the remaining 1/3) is focused on dividend paying stocks/funds, that will also add to your income stream.

Regarding your second and third questions, are you still interested in discussions?