Can Bonds Still Deliver the Returns Retirement Investors Need?

Bond returns tend to move up and down to a much lesser degree than stocks. For that reason, they’re commonly used by investors to reduce the overall volatility of a portfolio. Historically, though, bonds have also played another role in retirement portfolios, as both a source of income and return. But with current bond yields at record lows today, can bonds deliver the returns retirees need to ensure their money lasts for as long as they need it?

Should investors expect the same rate of return in the future?

Since 1982, bonds have returned just 1.3% less than global stocks. Should investors expect that same rate of return going forward? Definitely not. Why? Because over that same time period, since 1980, bond yields have fallen from the mid-teens all the way to near zero. The current yield of the Bloomberg Barclays U.S. Aggregate Bond Index is 1.2% [Figure 1]. In other words, rates are so low today, they have little room left to fall. So what can investors reasonably expect from here?

Can bonds deliver what investors need?

Can the typical 60/40 or 70/30 bonds-to-stocks retirement portfolio still deliver the returns and income retirement investors need? One look at the closely correlated relationship between bond yields and forward 5-year annualized returns suggests they can’t. Because historically, as bond yields have fallen, so too have average 5-year forward returns [Figure 1]. If this relationship holds, with yields as low as they are today, investors should expect bond returns to be low too, for the next 5 years at least.

The implication? Investors who’ve typically relied on bonds as a source of return, nevermind income, may want to consider taking a more tactical approach to fixed income investing, expanding their opportunity set beyond core bonds to riskier fixed income assets. Or, they may want to consider swapping some traditional fixed income allocations for equities with defensive characteristics.

To learn more about Horizon Investments’ retirement income solutions, explore our Distribution Strategies.


To download a copy of this commentary, click the button below.

Download The Big Number

To discuss how we can empower you please contact us at 866.371.2399 ext. 202 or

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. It is not possible to invest directly in an index.
Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent.
Other disclosure information is available at
Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC
©2020 Horizon Investments LLC
You are now leaving this website to go to

Connect product to planning with the Horizon technology suite. Goals-based strategies, cutting edge software.

Explore mutual funds managed by Horizon Investments.