Cash vs Bonds in Retirement

With cash paying higher yields than most bonds, retirees have started to ask if they should get rid of bonds. Here's one such email:

Since bond funds (BND) have done nothing the last ten years, what would be your thoughts on someone (retired) setting 3 years worth of living expenses aside (cash, CD’S, MM, etc.) and investing the remainder in equity index funds."

In this video I'll explain why bonds are a better, long-term investment than cash, particularly for those in retirement.

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#cash #bonds #robberger

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase and/or subscribe. However, I only recommend products or services that (1) I believe in and (2) would recommend to my own mom.

[JohnManyo-Plange]

What I love about how you tackle subjects is the depth you go into. You don't just answer the main question - you tackle all tertiary and related questions and thoughts around the subject. Makes it a great educational experience. Keep up the good work.

[BeechFA]

Rob Berger is the best financial source I know of. Not just on YouTube, but anywhere. He’s extremely impressive in his data-based approach, and he explains things clearly. I also note he has the intellect and confidence to keep his ego in check. I would hire him as a financial adviser, without question.

[jimjacobsonmd]

I've been laddering 6 month t-bills. I'd much rather do that than invest in bond funds.

[hickok]

Thank "God" for YouTube and highly articulate, informative nerds like Rob Berger! :-)

[callumfrank]

Food for thought: Place a sizable portion of your capital/savings in fixed-income securities like treasury bills, corporate bonds, government securities, debentures and let it grow. It will take you far I promise.

[CraigandJoan]

Outstanding review, Thank you. I'll keep my course of buying a Bond and holding to maturity A Bond fund is a bet on interest rates. I would even go so far as saying buying a Bond Fund is not investing in bonds, but really betting on interest rates, where truly investing in Bonds is to buy a Bond.

[janethunt]

You answered A LOT of our questions as we are preparing for my husband to retire in a year! Thank

[Kimmer]

You are spot on. People don't realize the risk of not holding stocks in their portfolio due to inflation.

[Encourageable]

Serious question, what is the advantage of buying a bond “fund”? Why not just buy bonds directly? Of course you have to reinvest them when they mature but that takes like 2 minutes. That way you can always choose the best interest rate. Only advantage I can think of is that someone is reinvesting it for you and you don’t have to worry about it.

[jessicaglover]

Lately I've been considering buying dividends stocks for retirement, I've set-asides $450K to invest but along the line, I get cold feet, maybe because I'm a rookie and have no idea what I'm doing, please I could really use some guidelines.

[mikewasserburger]

This is such a great analysis and perfect level of explanation. I learn more about finance from listening to Bob than anyone else combined. I really appreciate these videos Bob. Quote of the day from this video: "and the answer to that question nobody knows!"

[shaynebowen]

I really appreciate the quality and the insight and the clarity of your work. It is very valuable and I thank you so much!

[idog]

another factor to consider is when the yield curve returns to normal BND could rise to its historic value around $80/sh. that's another 10% gain. 💪

[wacoharder]

Thank you for addressing my question. Mike

[jeffb.]

Whatever helps you sleep at night - that's the right amount to hold in safe & secure holdings. When you switch from a saver to a spender, Preservation is key.

[alphamale]

I hear you, but last year it was very painful watching my stock funds and bond funds go down day after day in unison. My fixed income now 50/50 bonds/CDs. Lower volatility worth it for me.

[srconrad]

Great video, Rob. Timely too as I just retired and I’m getting ready to rollover my 401k to an IRA which is going to liquidate all 401k funds, giving me a chance to create a fresh stock/bond(cash) allocation.

[kevinmcnally]

Interesting topic(s). I hold about 80% equities and 20% fixed income assets. I went a little over on equities because I have a guaranteed pension and social security will also be risk-free income. For my fixed income assets I currently have it all in 1 year CDs paying over 5.25% and some in I-Bonds we bought last year. I am out of bond funds until we get interest rate increases leveled out. Bonds have not done well the 1+ years and rates may continue to go up until inflation is under control. Bond funds will continue to suffer as the fed raises rates. I felt pretty safe taking 1 year CDs and may get back into bond funds if rates have level out in the next 9 months or so. That could be timing the market, I guess, but I felt good taking a guaranteed 5.25% for a year.

[noreenn]

Thanks Rob, I'm going to watch this again and take notes!

[jw]

I'll save you some time, don't invest in bnd or anything like it when rates are going up. Money market funds and cds are paying 4.5% and higher. Fed is nearing rate increases then move to bnd and similar funds.