Retirement & Financial Planning Report

Over a long a time frame, you want the returns you’ll get from stocks, not from bonds. Ibbotson Associates, Chicago, has tracked 45 30-year periods: 1926 through 1955, 1927 through 1956, etc.


In 37 of those 45 30-year periods, U.S. stocks (represented by the S&P 500) had returns of 10% or greater. For the most recent 30-year period, 1970 through 1999, the annual return was a best-ever 13.7%. The lowest 30-year stock market return was 8.5%, which includes losses in the Depression of the 1930s. By comparison, long-term corporate bonds never returned as much as 10% per year, over any 30-year time period. The best return was 9.2% per year, over the last 30 years. In some of those 30-year periods, the return on corporate bonds was much lower, bottoming at 1.8% per year, from 1940 through 1969.

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Therefore, the worst 30-year period for stocks (8.5%) was nearly as good as the best 30-year period for bonds (9.2%). In most 30-year periods, stocks handily outperformed bonds, and that’s likely to be the case for the next 30 years. What’s more, you really don’t need bonds in your portfolio. With a federal pension and Social Security, you’ll get a lifelong stream of cash flow, indexed to inflation. That’s the equivalent of a bond portfolio worth hundreds of thousands of dollars. You already have safety and income in your retirement portfolio, from your pension and Social Security. What you really need is growth, and for that you need a carefully-chosen selection of stocks and stock funds.