Bonds might not provide as much bang as stocks, but they are an essential part of everyone's retirement portfolio. Here are some of the benefits they can provide:
Stability. Bonds are less likely to lose money than stocks are. So buying some bonds and some stocks can reduce your portfolio's losses during stock market declines.
Income. Bonds pay interest regularly, so they can help generate a steady, predictable stream of income from your savings.
Security. Next to cash, U.S. Treasurys are the safest, most liquid investments on the planet. Short-term bonds can be a good place to park an emergency fund, or money you'll need relatively soon.
Tax savings. Certain bonds provide tax-free income. These bonds usually pay lower yields than comparable taxable bonds, but may provide higher after-tax income to investors in high tax brackets. For more on tax considerations, see How are bonds taxed?
