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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How to De‑Risk Your Portfolio 5 Years Before Retirement
De-risking does not mean selling everything for bonds. It means cutting the risks that could force you to sell at the bottom, in the right order, while keeping enough growth for a retirement that may last 30 years.
Key takeaways
- Lower risk gradually over the last five to ten years, starting with the riskiest slice, not the whole portfolio. In 2008 an illustrative 90/10 stock and Treasury mix lost 30.9%; a 60/40 mix lost 13.9%.
- Bond type decides whether de-risking works. In 2022 long Treasuries (TLT) lost 31.2% while 1–3 year Treasuries (SHY) lost 3.9% and T-bills (BIL) gained 1.4%, in Exent’s data.
- Cut concentration first. A single stock or sector can fall far more than the index; in 2007–09 the median large US stock fell 61.6% against 56.5% for the S&P 500.
- Being 90% in stocks at 60 is not automatically wrong. It is too risky if a 2008-style loss would equal many years of the withdrawals you plan to take.
What is your own portfolio exposed to? Check it with Exent →
How do I de-risk five years before retirement without giving up all my growth?
Reduce the risks that could force a sale at the bottom, and keep the rest invested for growth. Retirement can last 30 years, so most of the money will not be spent for a decade or more. What needs protecting is the money you will spend in the first years of retirement, and the portfolio as a whole from a loss large enough to change your plans.
- Cut single-stock and sector concentration.
- Build a spending reserve for the first years of withdrawals in cash and short-term bonds.
- Then decide the overall stock share, based on measured crash losses, not on labels like “moderate”.
Doing it over several years, rather than in one move, also spreads out taxable gains and avoids betting everything on one date.
Is it too risky to still be 90% in stocks at 60?
It depends on how much you will withdraw and what other income you have. The table shows what three mixes did in the hardest stretches for retirees. Illustrative: $1.5 million, rebalanced yearly, using calendar-year returns for the S&P 500 index and 10-year US Treasuries from NYU Stern (Damodaran).
| Period | 90/10 | 60/40 | 40/60 |
|---|---|---|---|
| 2000–2002, cumulative | −31.3% (−$469,000) | −10.6% (−$159,000) | +5.2% (+$78,000) |
| 2008 | −30.9% (−$463,000) | −13.9% (−$208,000) | −2.6% (−$38,000) |
| 2022 | −18.0% (−$270,000) | −18.0% (−$269,000) | −17.9% (−$269,000) |
Calendar years hide the worst moments inside each year, so real peak-to-trough losses were larger. Two lessons stand out. Treasuries rose when stocks crashed in 2000–02 and 2008, so the bond share did its job. In 2022 stocks and bonds fell together, and the mix made almost no difference.
Now put the loss next to your withdrawals. If you plan to take $60,000 a year, the 2008 loss of a 90/10 mix equals almost eight years of spending. If a pension and Social Security cover most of your costs and you take $20,000 a year, the same loss hurts on paper but may not change your life. Exent’s hypothetical backtest of a monthly-rebalanced 60/40 portfolio (July 2016 to September 2026) showed a largest drawdown of 20.0% against 23.9% for the S&P 500, with annual growth of 9.5% against 15.2%: less pain, less growth. For ages and ranges, see asset allocation by age.
Gradual shift, buckets or a bond tent: which glide path?
Three common ways to lower risk into retirement:
| Approach | How it works | Strength | Weakness |
|---|---|---|---|
| Gradual shift | Move a few percentage points a year from stocks to bonds until a target mix | Simple, no single timing decision | Keeps falling after retirement, which may cost growth |
| Buckets | Hold one to several years of spending in cash and short bonds, the rest invested | Easy to understand; protects near-term spending | Total stock share can drift; needs refill rules |
| Bond tent | Raise bonds into the retirement date, spend them first, let the stock share rise again | Most protection exactly when sequence risk peaks | Requires discipline to raise stocks later |
The bond tent comes from research by Wade Pfau and Michael Kitces, who found that a stock share that starts lower in early retirement and rises over time can reduce both the chance and the size of portfolio failure (Journal of Financial Planning, January 2014). Results come from simulations, not a guarantee. Why the early years matter so much is explained in sequence of returns risk; how buckets work is in the retirement bucket strategy.
What should I cut first?
Cut the concentrated tail first: the one stock, sector or theme that could fall much more than the market. In 144 portfolios uploaded to Exent (Oct 2026), the median largest holding was 26.1% of the portfolio and the five largest made up 77.2%. Most of those portfolios rode on a handful of names.
Single stocks fell harder than the index in most crashes. In 2007–09, 220 of 349 large US stocks with data fell more than the S&P 500; in 2022, 338 of 464 did. Trimming a 25% position to 10% can lower the crash loss more than moving 15% of an index fund into bonds. Employer stock and options count too. See single-stock concentration limits.
Which bonds actually lower risk?
Short and high-quality bonds lowered risk in 2022; long bonds did not. Data as of Sep 30, 2026:
| ETF | What it holds | 2022 return | Largest drop, 10 years |
|---|---|---|---|
| BIL | 1–3 month T-bills | +1.4% | −0.7% |
| SHY | 1–3 year Treasuries | −3.9% | −7.3% |
| VTIP | Short-term TIPS | −2.9% | −11.7% |
| AGG | US investment-grade bonds | −13.0% | −23.4% |
| IEF | 7–10 year Treasuries | −15.2% | −27.7% |
| TLT | 20+ year Treasuries | −31.2% | −51.8% |
Long bonds still rallied in some stock crashes, such as 2008 and 2020. The point is to know which risk each bond holding covers. More in do bonds still hedge stocks? and on the SHY and TLT pages.
What to check this weekend
- Total stock share across every account, including 401(k), IRA, taxable and any employer stock.
- Your largest position and five largest positions as a share of the total.
- The dollar loss of a 2008 and a 2022 replay on today’s holdings.
- Years of planned withdrawals that loss represents.
- Years of spending held in cash, T-bills and short-term bonds.
- The average maturity of your bond funds: long bonds behave very differently from short ones.
- Taxes: in taxable accounts, gains on sales may be taxed; selling inside an IRA or 401(k) is not a taxable event by itself.
How to test a de‑risking plan with Exent
- Upload a screenshot of your holdings (or a CSV, Excel, PDF or Google Sheet); no brokerage login.
- Exent flags concentration, groups holdings that move together into correlation clusters and replays the portfolio through 2008, 2020 and 2022 in dollars.
- Lower a position or add bonds in the what‑if simulator and compare the crash losses and risk‑matched benchmark before you trade.
Frequently asked questions
It can be if you will depend on the portfolio soon. In 2008 an illustrative 90/10 stock and Treasury mix lost about 31% in the calendar year. Compare that dollar loss with your planned withdrawals and other income.
Many planners start five to ten years before the retirement date and move gradually. The years just before and after retiring carry the most sequence risk, so that is where the extra protection matters.
It is a glide path that raises the bond share into the retirement date, spends those bonds first, and lets the stock share rise again later. Pfau and Kitces described it in the Journal of Financial Planning in 2014.
No. Treasuries rose in 2008, but in 2022 stocks and bonds fell together, and long Treasuries lost more than stocks. Short-term Treasuries and T-bills held up best that year.
That is a personal decision involving taxes and your goals. Large single positions add crash risk, because most individual stocks fell further than the S&P 500 in 2008 and 2022. A fee-only planner can help weigh the trade-offs.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.