Do you think there are also sequence-of-expense risks in retirement? For instance, if inflation averages 3% over the retirement window, how much difference does it make if below-average inflation occurs earlier in the window versus later (assuming that not all income is inflation-adjusted nor needs to be)?
There is "sequence of expense" risk in retirement, or said differently, sequence of returns risk includes expenses. Early portfolio failure isn't directly a result of low returns early in retirement. The direct cause is spending more than your portfolio earns. You can see this because a lower spending rate survives more periods of poor returns than a higher one, and because your portfolio can survive any historical period of poor returns if you lower the withdrawal rate enough.
So, higher expenses early in retirement for any reason will drain more from your savings and increase the probability of portfolio failure and will have a greater impact than more spending late in retirement.
Inflation, however, is a separate issue and depends on the sources of your retirement income. Social Security benefits have a COLA adjustment. TIPS bonds have an inflation adjustment. You can purchase annuities with a COLA adjustment, though they cost more (I think they're worth it). Stocks perform poorly when inflation is high, but tend to make up for it later with higher returns. To the extent that your retirement income comes from these sources, inflation won't make a lot of difference.
Some pensions don't have inflation protection. Several senior expenses see more inflation than you can protect. To the extent you have these, prices will increase over time, but will have less impact on SOR risk because they are greater later.
I liked your SOR slide presentation. What do you think of a rolling 10yr CD bond ladder. I am not very familiar with TIPS but I do like CDs. Will a CD bond ladder mitigate SOR risk? Also, holding individual bonds till maturity, does that mitigate SOR risk?
A rolling 10-year CD ladder would have no SOR risk, but then neither would individual CD's. CD's are not volatile. Their value is independent of stock market returns. There is also no interest rate risk, because you lock in the interest rate when you buy the CD. Therefore, there is no sequence risk.
A CD ladder is a very safe way to insure that you will have a predictable amount of income to spend in each of those 10 years. Why would I prefer a TIPS ladder? TIPS bonds are arguably safer, but not much, and TIPS have inflation protection while CD's don't. But I agree that CD's are easier to buy than TIPS bonds.
TIPS are individual bonds, so I'm guessing you are asking about a ladder of corporate bonds. That would also eliminate SOR risk, but would introduce credit default risk. The U.S. government can't default on bond payments by federal law, while a corporate bond issuer could. Like CD's, corporate bonds are subject to inflation, so I would prefer TIPS. Corporates pay higher rates of interest than Treasuries, but that's because they're riskier.
The next risk of concern would be that buying a ladder of anything today is locking in historically low interest rates. A TIPS bond fund might perform better than a ladder over the next decade, but it also might not. It seems like the odds of rates going up outweigh the odds of them going farther down at this point, favoring funds over ladders. But, only with a ladder do you know exactly what you will get back and when.
So, my preference for safety and inflation protection would be a TIPS bond ladder. A CD ladder would be fine if you're OK with no inflation protection. Corporate bonds aren't a good idea, even laddered. They have neither inflation protection nor protection from default.
If you are in a high tax bracket (most retirees aren't), then laddered municipal bonds might make sense.