Travelover
Elite Member
There are a couple of ways to look at this.
If you are getting any kind of pension or SS benefits, advanced retirement and/or financial planners will frequently treat these as "phantom" bonds. I.e. you consider yourself as having fixed income bonds which would produce the same income as your pension or SS, possibly with a discount for the non-reliability of pensions.
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This is a valid point and one that is argued endlessly on financial forums. Factors to consider:
How secure is your pension provider? Although the Pension Benefit Guaranty Corporation backs pensions, it is not like FDIC. If you are an early retiree you don't necessarily get all your pension and even if 65 years old, there are caps on the total. Airline pilots of failed airlines and more recently, Delphi employees got a stark reminder of this. The PBGC also does not cover health care benefits (and is nearly broke).
A second factor is your psychological reaction of a sudden market drop. If you are prone to freak out and sell your stocks, you may get wiped out. Bonds can lose value if interest rates rise suddenly, but not nearly so dramatically and they continue to payout the same income.
So, the crux of the argument is why take any more risk than you absolutely need to, to satisfy your retirement needs?
That said, I have a pension and hold 30% bonds, which seems to be a sweet spot with respect to total returns over time, and risk. If my pension fails and the market has crashed, bonds give me 5 or more years to sit out a bad market.