This week’s theme is bond investing.

Bonds will likely be a critical component for your investment portfolio in retirement, so this week I’m sharing with you what I’ve learned from working with clients over the last 11 years, and buying and selling upwards what I estimate to be over $100 million dollars worth of bonds for clients over that time.

Today I want to focus on why you should consider investing in bonds for your retirement in the first place. Some people object to bonds because the returns are lower than stocks. And that’s true. Over the long-run, you might only expect to receive about ½ of the amount in return that you could earn from investing in stocks.

But here’s why owning bonds is worthwhile: Bonds provide income and stability - two very important characteristics for an investment portfolio in retirement. So let’s talk about each one of these separately:

• Income - Bonds provide steady and reliable income as long as you invest in high quality bonds. This becomes critically important in retirement, as you’ll want to make sure that if you need to pull out $40,000 of income annually from your investments, that a significant portion of that is coming from the income that’s already baked in. That way, you won’t have to rely solely on growth to provide the income you might need from your investments.
• The other key benefit of owning bonds is that they provide stability during downturns in the stock market and the economy. As long as you stick with high-quality bonds, you won’t have to worry too much about your bond portfolio cratering in value in the next recession. But rather, it provides some much needed stability from your stock portfolio that’s gyrating more than a drunk girl at a bachelorette party when the economy heads south.

There are a lot of other reasons to own bonds in retirement - like diversification and tax advantages if you own tax-free municipal bonds, but income and stability are the key characteristics that I always come back to when clients ask me why they can’t just put everything in the stock market.

That’s it for today, Thanks for listening!

Tomorrow I’m going to explain how much of your portfolio should be invested in bonds in retirement.

My name is Ashley Micciche and this is the One Minute Retirement Tip.

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