What Percentage of Retirement Funds Should Bonds Be?

Proper exposure to bonds could support retirement income for life.
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Informal rules for asset allocation make investing for retirement less intimidating. Investing too heavily in bonds could cause you to miss out on profits achieved elsewhere, while investing too lightly in bonds could be risky and leave a retirement portfolio unprotected from losses. Striking the right balance between bonds and other asset classes begins by knowing what percentage of retirement funds should be invested in bonds at any given time in your life.

Bond Types

When determining the percentage of investment capital you should direct to bonds, consider the different types of bond securities available. The safest bonds include government Treasuries as well as investment-grade corporate and municipal bonds. These debt securities protect your capital while growing assets at a moderate pace. High-yield bonds are riskier investments and are rated below investment grade. Ratings reflect the likelihood of issuer default compared with U.S. Treasuries. Nonetheless, high-yield bonds deliver some of the highest profits in the market. The precise allocation to each type should be based on your tolerance for risk and need for returns.


One strategy for investing for retirement is based on a formula used by retirement specialists and cited in a 2011 article on the Smart Money website. Individuals should subtract their age from 120; the result is the percentage of assets that should be directed into stocks. The remainder of assets should be invested in fixed income securities, including bonds, according to specialists quoted in the article. If your investments are in individual retirement accounts, you should increase your exposure to bonds because of the tax-friendly nature of IRAs toward debt securities. IRAs do not require investors to pay taxes on earnings every year -- a plus considering the steady earnings that bonds provide.

Bond Allocation

Age is a factor when determining how much of your assets should be directed into bonds for retirement. Individuals between the ages of 35 and 44 should focus on growing the size of their investment portfolio, which is generally accomplished with stocks in addition to the capital preservation that bonds provide. Only 15 percent of assets of individuals in this age bracket should be exposed to bonds, based on a 2012 article on the CNN Money website. Of that, the individual should invest in high-quality, domestic, fixed-income assets.

Target Date Funds

Target date funds can help you allocate the appropriate percentage of assets to bonds based on your age. Target date funds are mutual funds that have a retirement year assigned to them. Based on that year, the fund's asset allocation to stocks and bonds changes as you get closer to retirement. The younger you are, the smaller your exposure to bonds should be. As you get older, the fund's composition changes to favor bonds as portfolio managers move to protect your capital. You can get increased exposure to bonds sooner by choosing funds with earlier target dates attached.

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