Do Bonds Still Hedge Stocks After 2022?
For two decades, Treasuries tended to rise when stocks fell. In 2022 they fell together. Here is how the stock‑bond relationship has changed, which bonds helped in which crash, and what a bond hedge costs.
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Bond Ladder vs Bond Fund: Which Is Better for Retirement Income?
A bond ladder gives you known dollars on known dates. A bond fund gives you simplicity and diversification but no maturity date. Here is how they compare on rate risk, cost, effort and inflation, with what each did in 2022.
Key takeaways
- A bond ladder suits money you must spend on known dates: each bond held to maturity pays back its face value if the issuer pays. A fund never matures, so it can be down when you need cash; the AGG bond ETF lost 13.0% in 2022.
- Both lose market value when rates rise. The difference is that a ladder’s loss disappears if you hold each bond to maturity, while a fund’s recovery depends on future yields and time.
- A TIPS ladder adds inflation protection: TIPS principal rises with the CPI, you never get back less than the original principal at maturity, and interest is free of state and local tax (TreasuryDirect).
- Funds win on effort, diversification and small amounts. Many retirees ladder the next five to ten years of spending and hold a fund for the rest.
Bond ladder or bond fund: which is better for retirement income?
A ladder is better for spending you can date; a fund is better for money with no fixed date. A bond ladder is a set of individual bonds that mature one after another, for example one each year for six years. When a bond matures, you get its face value back and spend it. A bond fund holds hundreds or thousands of bonds and keeps replacing them, so the fund itself never matures.
The SEC’s investor site puts the key point simply: a bond held to maturity returns its face value plus interest, while a bond sold before maturity may be worth more or less (Investor.gov, Bonds FAQ). That is exactly what a retiree with a dated spending plan wants to know.
How do a bond ladder and a bond fund compare?
| Bond ladder (individual bonds) | Bond fund or ETF | |
|---|---|---|
| Principal at a known date | Yes, if held to maturity and the issuer pays | No maturity date; value floats |
| Interest-rate risk | Prices fall when rates rise, but the loss is temporary if held to maturity | Prices fall when rates rise; longer funds fall more |
| Credit risk | Concentrated in the bonds you pick; Treasuries carry the least | Spread across many issuers |
| Inflation protection | Possible with a TIPS ladder | Possible with a TIPS fund, but no maturity floor |
| Income pattern | Coupons plus a lump sum each year a rung matures | Monthly distributions that change over time |
| Effort | Buy each bond, track maturities, rebuild or spend | One purchase, automatic reinvestment |
| Cost | No ongoing fee on Treasuries you hold; spreads can be wide on some corporate and municipal bonds | An annual expense ratio |
| Works well for | The next five to ten years of withdrawals | Long-term bond allocation, smaller amounts |
How much did bond funds lose in 2022?
The longer the bonds, the bigger the loss. Calendar-year 2022 returns and the largest drop over ten years, from Exent’s data as of Sep 30, 2026, with the 2022 result on an illustrative $500,000:
| ETF | Holds | 2022 return | On $500,000 | Largest drop, up to 10 years |
|---|---|---|---|---|
| SGOV | 0–3 month Treasuries | +1.6% | +$8,000 | −0.7% |
| SHY | 1–3 year Treasuries | −3.9% | −$19,500 | −7.3% |
| BND | US investment-grade bonds | −13.1% | −$65,500 | −24.0% |
| AGG | US investment-grade bonds | −13.0% | −$65,000 | −23.4% |
| IEF | 7–10 year Treasuries | −15.2% | −$76,000 | −27.7% |
| TLT | 20+ year Treasuries | −31.2% | −$156,000 | −51.8% |
- SGOV
- Holds
- 0–3 month Treasuries
- 2022 return
- +1.6%
- On $500,000
- +$8,000
- Largest drop, up to 10 years
- −0.7%
- SHY
- Holds
- 1–3 year Treasuries
- 2022 return
- −3.9%
- On $500,000
- −$19,500
- Largest drop, up to 10 years
- −7.3%
- BND
- Holds
- US investment-grade bonds
- 2022 return
- −13.1%
- On $500,000
- −$65,500
- Largest drop, up to 10 years
- −24.0%
- AGG
- Holds
- US investment-grade bonds
- 2022 return
- −13.0%
- On $500,000
- −$65,000
- Largest drop, up to 10 years
- −23.4%
- IEF
- Holds
- 7–10 year Treasuries
- 2022 return
- −15.2%
- On $500,000
- −$76,000
- Largest drop, up to 10 years
- −27.7%
- TLT
- Holds
- 20+ year Treasuries
- 2022 return
- −31.2%
- On $500,000
- −$156,000
- Largest drop, up to 10 years
- −51.8%
A ladder of Treasuries maturing over the next few years also showed paper losses in 2022. The difference: each rung still paid its full face value on its maturity date. A retiree spending from a fund had to sell shares at the lower price. Investor.gov notes that funds holding longer-maturity bonds carry more of this risk (Investor.gov, bond funds). See also bond duration and the AGG and TLT pages.
There is a flip side. When rates rise, a fund reinvests maturing bonds at the new, higher yields, so its income climbs over the following years. A long-term investor who does not need to sell can wait for that. A retiree who must sell on a schedule cannot, which is why the spending date, not the product, should decide.
How does a bond ladder work in retirement?
Illustrative: a couple needs $50,000 a year from savings for the next six years and sets aside $300,000.
| Rung | Matures | Face value | Use |
|---|---|---|---|
| 1 | Year 1 | $50,000 | Spending, year 1 |
| 2 | Year 2 | $50,000 | Spending, year 2 |
| 3 | Year 3 | $50,000 | Spending, year 3 |
| 4 | Year 4 | $50,000 | Spending, year 4 |
| 5 | Year 5 | $50,000 | Spending, year 5 |
| 6 | Year 6 | $50,000 | Spending, year 6 |
Illustrative, before interest. Coupons add income along the way, so the couple might need a little less than $300,000 at the start. Each year they either spend the maturing rung or, if stocks did well, buy a new rung six years out. If stocks crash, the ladder keeps paying and they do not have to sell. This is how many retirees fill the safe part of a bucket strategy.
What is a TIPS ladder?
A TIPS ladder uses Treasury Inflation-Protected Securities, so each rung’s value keeps pace with inflation. According to TreasuryDirect, the Treasury sells TIPS with 5, 10 or 30 year terms. The principal rises with inflation and falls with deflation, measured by a consumer price index, and at maturity you never get less than the original principal. Interest is paid every six months on the adjusted principal. Federal tax is due each year, and changes in principal can affect it; there is no state or local tax. The minimum purchase is $100.
Because the yearly principal increase can be taxed before you receive it, many investors hold TIPS in an IRA or 401(k). For the concept, see inflation-protected securities.
When does a bond fund make more sense?
A fund makes more sense when the money has no fixed spending date, when the amount is small, or when you do not want to manage individual bonds. A fund also spreads credit risk across many issuers, which matters more for corporate bonds than for Treasuries. Some ETFs hold bonds that all mature in one year and then return cash, which sits between the two approaches.
- Write down the dollars you will need from savings in each of the next five to ten years.
- Check the average maturity or duration of every bond fund you own.
- Note what each fund did in 2022 and compare it with the spending it is meant to cover.
- For a ladder, decide where it sits: TIPS and taxable bonds are often easier to hold in an IRA.
- Keep the rest of the bond allocation in a diversified fund if you prefer less upkeep.
How to check your bond holdings with Exent
- Upload a screenshot of your holdings (or a CSV, Excel, PDF or Google Sheet); no brokerage login.
- Exent replays bond funds and stocks together through 2008, 2020 and 2022, so you see whether the bond side cushioned or fell alongside.
- Swap a long bond fund for a shorter one in the what‑if simulator and compare the crash loss and risk before you trade.
Frequently asked questions
A Treasury ladder held to maturity gives more certainty about the dollars you get on each date. A fund is more diversified but has no maturity date, so its value can be down when you need to sell.
Interest rates rose quickly, and bond prices fall when rates rise. Funds holding longer bonds fell most; the TLT long Treasury ETF lost 31.2% in 2022 in Exent’s data.
It is a ladder of Treasury Inflation-Protected Securities maturing in different years. The principal adjusts with inflation and is never less than the original amount at maturity.
Many retirees ladder five to ten years of planned withdrawals. Longer ladders lock in more certainty but tie up more money in bonds.
Holding Treasuries has no ongoing fund fee, but buying and selling some bonds can involve spreads or commissions. Bond funds charge an annual expense ratio.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.