Short answer: bonds aren’t there to win — they’re there to keep you from losing. In your saving years, stocks do the heavy lifting; in retirement, bonds take on a crucial defensive role: providing stable value and safe money to spend so a market crash doesn’t force you to sell stocks at the worst possible time. It’s less about return and more about resilience.
Why hold bonds at all?
Over long periods, stocks outperform bonds — so during your accumulation years, they carry the portfolio. Bonds earn their place for a different reason: they’re far steadier. In retirement, when you’re withdrawing money to live on, that steadiness becomes essential. Bonds are the part of the portfolio you can rely on to be there when you need to spend it.
What is sequence risk?
How do bonds solve it?
A buffer of bonds (and cash) gives you something safe to spend from when stocks are down, so you don’t have to sell equities at a loss to pay the bills. You let the stock portion recover while living off the stable portion. That’s the whole point — bonds aren’t a bet on returns, they’re insurance against being forced to sell at the wrong time. This is why even growth-minded retirees usually hold some.
“Playing to win” vs. “playing not to lose”
Accumulation is a game of playing to win — maximizing growth over decades. Retirement shifts toward playing not to lose — protecting what you’ve built so it reliably funds your life. Bonds are the clearest expression of that shift. The mistake in either direction is being all-offense when you should be balanced, or so defensive that inflation quietly erodes you.
How much should you hold?
Enough to cover several years of spending needs beyond other income like Social Security, but not so much that inflation erodes your long-term purchasing power. The right balance depends on your spending, other income, and temperament — it’s part of setting a retirement asset allocation and building a durable retirement paycheck.
Frequently asked questions
Because in retirement, stability matters as much as growth. Bonds provide safe money to spend so a market downturn doesn’t force you to sell stocks at a loss — protecting against “sequence risk,” a bad market early in retirement. They’re defensive insurance, not a bet on returns, which is why even growth-oriented retirees usually hold some.
Enough to cover several years of spending needs beyond other income, so you can ride out downturns without selling stocks — but not so much that inflation erodes your purchasing power. The right amount depends on your spending, other income sources, and risk tolerance, and is part of setting your overall asset allocation.
Sources
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is the founder of Dental Wealth Partners and a fee-only financial planner dedicated to dentists. As an investment adviser representative (Series 63 and 65), he built the firm to give dentists coordinated, fiduciary advice across their practice, taxes, investments, retirement plans, and long-term goals — the whole picture in one strategy. A graduate of Belhaven University, Ian previously worked at Davis Private Wealth, MML Investors Services, and Northwestern Mutual, and is based in the Jackson, Mississippi area. He is the author of The Wealthy Dentist and hosts the Smiles & Cents podcast.
Keep reading
- Building your retirement paycheck: turning savings into incomeRetirement flips the problem from saving to spending. How dentists can turn a portfolio and practice-sale proceeds into a reliable, tax-smart paycheck.
- How should a dentist set their asset allocation?Asset allocation — your split between stocks, bonds, and cash — drives most of your returns and risk. How dentists should set and maintain theirs.
- When should you stop saving and start spending?Lifelong savers often struggle to spend in retirement. How to know when you have “enough,” and give yourself permission to enjoy what you built.