No Bonds at 80? How This Woman Retires with 100% Stocks

Hey everyone. So, I have a client, we’ll call her Susan, and Susan is 80 years old.

Now, if you picked up her investment statement and glanced at it, you might scratch your head. Because what you’d see is zero bonds. Not a single one.

And at first, that might sound strange, right? Because we’ve all heard that rule of thumb — “the older you are, the more bonds you should have.” Or I’ve even heard of the one where you take 100 minus your age, and that’s how much you should put in stocks or something like that. I have no idea.

But here’s the thing — those rules don’t always fit real life. Just because you’re a particular age, doesn’t mean you should have a certain amount of bonds. And Susan is a perfect example of why.

So, let me give you her financial picture here. So, Susan is 80 years old and she has a:

• A brokerage account worth about $1.5 million.

• An IRA with about $650,000.

• A paid-off home. No debt whatsoever.

• And here’s the cool thing — she has a pension that pays her $80,000 a year. On top of that, Social Security adds about $3,500 more per month, which is another $42,000 a year.

So just from guaranteed income — her pension plus Social Security — she has $122,000 a year coming in.

Another thing to know about Susan is her spending is also very minimal. She lives comfortably, but modestly. Her lifestyle doesn’t even come close to using all that income. In fact, she has money left over each year, which she turns around and adds back into her brokerage account.

Why No Bonds?

Now, let’s go back to the question: why does Susan have zero bonds in her portfolio?

Well, the answer is that she does have bonds — they just don’t show up on her investment statement. What the heck does that mean? Well, it’s because her pension acts like a giant bond.

Think about what bonds are for in a portfolio. They provide hopefully steady, reliable income. They typically reduce risk. They can act as the stabilizer when the market goes through its ups and downs. That’s all part of their intended position in a portfolio.

Susan’s pension is doing all of that already. It’s providing her $80,000 a year, no matter what the market does. And add in Social Security, and that’s another bond-like stream of income. So, together, those fixed payments are like having a multi-million-dollar bond portfolio that she doesn’t have to manage.

So why would Susan also need to hold a bunch of bond or bond funds in her investment accounts? For her, that would be redundant.

Challenging the “Rules of Thumb”

So, let’s go back to those rules of thumb for a second. “100 minus your age” to figure out your stock allocation, or whatever it is. Or “as you get older, shift into bonds.”

Rules of thumb can be useful starting points, but they don’t account for pensions. They don’t account for Social Security. They don’t account for individual lifestyles, meaning, someone like Susan who lives well below her means and is quite modest.

If Susan followed that typically advice, that would mean shifting hundreds of thousands of dollars into lower-growth investments — even though she doesn’t need that safety net.

For Susan, following that “rule of thumb” would mean giving up potential growth for no good reason. And growth still matters to her — because even though she doesn’t have kids, she wants to leave a meaningful legacy to her nieces and to charity.

Why Growth Still Matters

So, this is where Susan’s story gets interesting because she could play it ultra-safe. With her pension and Social Security covering her spending needs, she could keep her investments conservative and never have to worry.

But that’s not her goal. She wants her money to work harder than that.

Because the thing is, she’s not drawing down her portfolio. Quite the opposite, actually. She’s adding to it each year. So, that means she can afford to think long-term. She can afford the volatility of the market. And because she doesn’t need her portfolio to fund her day-to-day expenses, she can keep her money invested in stock funds rather than bond funds.

So, this gives her the best chance of growing her wealth over the next 15, 20 plus years. And that growth is what allows her to leave behind a bigger impact — both for her family and for the charities she cares about.

Risk Capacity vs Risk Tolerance

So, let’s talk about risk for a second. Because this is where a lot of people get tripped up.

Let say there’s, two sides to risk, for now:

1. Risk tolerance — how much risk you feel comfortable with.

2. Risk capacity — how much risk you can actually take on, based on your financial situation.

   
   

So, Susan is in the rare spot where her capacity for risk is extremely high. Even if the market went down tomorrow, her pension and Social Security would still cover her lifestyle. She’s not depending on her portfolio for income.

And her tolerance for risk? She’s actually fine with the ups and downs, because she knows her bills are paid regardless. That makes her portfolio allocation much more aggressive than the “typical” retiree — and it makes sense for her.

The Bigger Point

So, the bigger point is this: retirement planning isn’t one-size-fits-all. Those rules of thumb — the age-based bond allocation thing and blanket advice to get more conservative as you get older — they don’t always apply.

For someone without a pension, who’s relying 100% on their portfolio to fund their retirement, yes, bonds do play an important role.

But for Susan? Bonds would just be redundant to what she already has. Her pension already gives her that bond-like foundation. And that allows her portfolio to be invested for growth, without jeopardizing her lifestyle.

So your plan should fit your situation.

If you have guaranteed income streams — whether it’s a pension, Social Security, or even an annuity — those count. They reduce the need for bonds and can change the way your portfolio should look.

And if, like Susan, you’re in the fortunate position where your guaranteed income covers your expenses and then some, you may not need bonds in your accounts at all. You can keep your investments tilted toward growth, if that’s what you want, it may not be and that’s OK too.

That’s the power of looking at the whole picture — not just your age, not just a rule of thumb, but your actual life, your goals, and your numbers.

So, I hope that explained a little bit about bonds in a portfolio, or not in a portfolio, like in Susan’s case and so thanks for listening and I’ll see you on the next episode.