Do Bonds Still Make Sense For Retirement Savings? The Debate

My recent video saying bonds are dead as an investment has started a debate on MoneySense and industry forums.

Here is what the bond advocates are missing:

It’s a financial planning issue.

For example, if you and your spouse earn $50,000/year each ($100,000 total) and you want to retire on $80,000/year in today’s dollars in 30 years (today’s lifestyle less your mortgage plus a bit for travel and entertainment), you need to invest $34,000/year for 30 years! If your incomes are higher, you probably need to save 50% of your salary (before tax).

See the 4 examples in my video for single/married people with different incomes.

Ed’s advice: Don’t invest in bonds without having an interactive retirement plan. You need to see how much it reduces your retirement lifestyle. You need to see how much more you have to invest every year with bonds to have the same retirement.

Bonds are unreliable long-term.

Bonds have super-long losing periods. In the “Bond Collapse” of 1940-80, you were down 50% after inflation 40 years later! Stocks fluctuate, but are not down 50% decades later.

Bonds get killed by inflation and by rising interest rates. Both of these are issues now. Normally, bond returns are barely above inflation, except for decades with declining interest rates, which we are not going to see for a long time.

Check out the “Bond Collapse” of 1940-80 vs. the “Bond Bubble” of 1980-2020 in this chart:

Outside of the last 40 years, bonds made zero after inflation from 1900-1985 globally. That’s 85 years with zero after inflation. You can’t build your retirement nest egg this way:

Ed’s advice: Ignore all stats on bond returns that only include the last 40 years. It was a super-weird “Bond Bubble” with returns unlike anything we will see again in our lives. It’s like looking at the Tech Bubble from 1995-99 and making conclusions about stocks. Always look at returns for a minimum of 80 years to also include the related “Bond Collapse”.

Risk tolerance is a learned skill and hugely beneficial to you.

All the arguments in favour of bonds relate to reducing short-term or medium-term volatility. This is the only argument anyone has made advocating bonds. Essentially, they are saying that when your investments decline, you will panic and sell.

Will you actually panic and sell? We call this the ”Big Mistake” – selling or switching to more conservative investments after a market decline. If you would make the “Big Mistake”, then you need something to reduce how far your investments fall. Even then, cash is probably safer than bonds.

Nobody disputes that the long-term returns of stocks are many times higher than bonds. If you will stay invested long-term through all the temporary market declines, being 100% in equities will almost definitely give you a far more comfortable future.

Remember: Risk tolerance is the ability to do nothing when your investments are down.

You can learn to have a higher risk tolerance. I learned to have a “turbulence tolerance” that allows me to be comfortable and confident on airplanes. With a higher risk tolerance, you can retire far more comfortably – or you can have the same retirement while investing only 1/3 to ½ as much.

The difference in your life is huge!

How do you learn to have a higher risk tolerance?

Study the long-term returns of stocks. See how reliable they are long-term (25-year periods and longer).

Study how large and often stock market declines happen and how long they have taken to recover.

See how they have been reliable for all of the last 200 years, despite 2 world wars, the Great Depression, several past pandemics without vaccines, high inflation, high interest rates, and everything that happened the last 200 years.

Stocks are large companies with managements that adapt to whatever happens in the economy.

If you are truly a long-term investor and long-term thinker with a good risk tolerance, there is no reason for you to have any bonds in your portfolio. That means you may want to consider selling any investment with these names – bond, income, balanced, asset allocation, target date, or all-in-one.

Ed’s advice: Learn to have a higher risk tolerance. Get educated. Think long-term. Ignore all the short-term and medium-term markets. Ignore the investment industry when they focus on fear of short-term fluctuations. Don’t try to predict the future.

Just be confident that 25 years from now, the stock market will almost definitely be between 7 times and 17 times higher than today.



Blog Posts & Videos

Can you be confident in the stock market? (BLOG POST)

Risk of Bonds to Your Retirement (VIDEO)

The High Risk of Bonds (VIDEO)


“Stocks for the Long Run” – Prof. Jeremy Siegel

“Triumph of the Optimists” – Dimson & Marsh

“Simple Wealth, Inevitable Wealth” or “Behavioural Investment Counselling” – Nick Murray

Other Resources Mentioned In This Blog Post

Do bonds still make sense for retirement savings? (MoneySense Article)

Industry Debate on Rational Reminder Community (Login Required – Topic Search: Ed Rempel: “Risk of Bonds to Your Retirement”)

Planning With Ed


Ed Rempel has helped thousands of Canadians become financially secure. He is a fee-for-service financial planner, tax  accountant, expert in many tax & investment strategies, and a popular and passionate blogger.

Ed has a unique understanding of how to be successful financially based on extensive real-life experience, having written nearly 1,000 comprehensive personal financial plans.

The “Planning with Ed” experience is about your life, not just money. Your Financial Plan is the GPS for your life.

Get your plan! Become financially secure and free to live the life you want.


  1. A graph for the difficult days… – Dominic Feron on November 10, 2023 at 9:08 AM

    […] Source […]

  2. Don Jackson on May 5, 2022 at 7:20 AM

    Your commentary seems to focus on, ‘Don’t buy bonds’ — and I don’t disagree with your premise. But what about bonds that have already been purchased? I bought units of a bond fund about 3 years ago that currently represent about 10% of my portfolio. Duration is ~2.5 years, so it’s pretty short-term. My total return is +1% but includes it a capital loss of 2.5% ($7K) that I will have to eat if I sell. Yield-on-cash is ~4% (attractive) and the dividend $ has been steady for the past 2 years.
    Hold? Or sell?

  3. Nick on May 4, 2022 at 12:11 PM

    Excellent post Ed – thank you!

Leave a Comment