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A few decades ago, Treasury bonds paid over 15% interest. Today, you’re lucky if you can get 2-3%. 

Yet bonds remain a core tenet of retirement planning orthodoxy. Try telling an investment advisor that you don’t want any bonds in your portfolio and they’ll burst a blood vessel. 

I admit freely, though, that I don’t invest in bonds at all. Nor do I plan to start as I get older. 

Instead, I fill that niche in my portfolio with private notes and a combination of investments that include crowdfunded passive real estate investments and rental properties.

Why Inflation Wrecks Your Bond Returns

Most bonds pay a fixed interest rate. You earn interest payments until the bond matures, then you get your original investment back.

Imagine buying a one-year Treasury bill (short-term bond) that pays 2% interest. At the end of that year, you’ll end up with your original principal plus 2%.

But if inflation rages at 8.5% as it has over the last year, you’ve effectively lost 6.5% on your investment. Sure, you earned 2% interest, but you lost 8.5% in purchasing power. 

Granted, you can buy bonds that pay 10%, 15%, or 20% interest. But they come with a high risk of default, defeating the entire purpose of bonds for most investors.

The Role of Bonds in Your Portfolio

Bonds offer several types of protection for investors as they near retirement. 

To begin with, bonds come with far less volatility than stocks. Stock markets are prone to sudden lurches and drops, which is fine for workers who can buy in at a discount, but retirees typically sell off their stocks to cover their living expenses. Retirees have to sell more of them when stocks slide in value to cover their bills and empty their nest eggs faster. 

And while bonds may fluctuate in value on the secondary market, retirees can buy and hold them for consistent passive income. Income that retirees can rely on month in and month out. 

Finally, bonds offer diversification from the stock market. The stock…




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