5% Bond Returns Are a Gift for Retirement Investors. My Favorite Way to Invest in Treasurys Lets You Earn a Paycheck No Matter What the Market Does.

That chart above shows the history of the U.S. 10-Year Treasury bond ($TNX), all the way back to my rookie year in the business (1986). Frankly, the investing world and the world in general were so different back then. The stock market hadn't yet crashed 22% in a single day (1987), Japan was barely beyond "emerging market" status, and the New York Mets were really good.

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Still I did not appreciate just how good bond investors had it back then. They didn't either, since rates had been in the 10% range or higher for a while, following the 1970s, a decade in which rates peaked in the high teens.

The difference today: I suspect stock market returns are in the process of peaking in that same 15%+ annualized range right now.

I frankly had no idea bonds touched 10% early in my career. But inflation was high to match, so I assume that it was just par for the course.

My attraction to bonds, when the 10-year is at 4.5% and the longest bonds are around 5% or so, is not so much about the real return. I do not know if inflation will kick much higher. In fact, that chart above provides at least a hint that if we see 5% on the 10-year, we could be opening the door to much higher rates.

But let's take things one step at a time here. Because as I see it, I have bond rates exactly where I want them. The current macro setup gives us a beautifully defined win-win-win scenario if you deploy the right tools.

You can lock in a baseline 5% yield, maintain a tactical hedge to protect you if inflation forces interest rates even higher, or position yourself for a massive capital gains windfall if the economy suddenly cracks and interest rates dive. And to me, my bond ladder (of zero-coupon U.S. Treasuries) is simply a base layer on a portfolio that includes ETFs and trading accounts.

Part of that trading is to "overlay" the bond ladder with ETF and/or option positions that can profit while the long-term bonds are losing money on paper. Yet with bonds we own directly, not through ETFs or mutual funds, we know exactly what we are getting and when. That's very liberating.

For pre-retirees and baby boomers like me, a sensible move to consider is to lock in this gift by building a high-yield Treasury ladder. But the real magic happens when you don't just sit on that ladder — you actively work alongside it using a modern ETF toolset to boost the returns of both your fixed income and your non-ladder assets.

To understand why 5% is a helpful base return for me, check that first chart again. For nearly this entire century, 5% has been a solid annual return. And if this market bubble ends like the last several did, we'll have an extended period where 5% a year will not only look great versus equity returns, it might also save your retirement.

For my personal portfolio, I have constructed a comprehensive zero-coupon Treasury bond ladder designed to pay out a massive, guaranteed annual paycheck every single year from 2030 all the way through 2049, covering my personal horizon from age 66 to age 85. I have and will adjust it as market conditions change. But the core ladder is in place. Like an annuity, but I control the ship.

I'm 62, so this also creates a very gradual financial planning process, whereby I know some core parts of my retirement plan are set. The wildcards are things like how much I work, how much I make while working, and how much risk I take in the rest of my portfolio. The key is that I am DIY-ing my way through it, but with way less pressure to have the stock market determine my destiny.

With that baseline completely secured, the rest of my portfolio becomes a flexible, "go-anywhere" vehicle designed to grow in a strictly risk-managed way. Here is how that blueprint handles any directional macro wave the market throws at us next:

Scenario A: Rates Hold Flat. If sticky inflation keeps the Federal Reserve frozen, your ladder does exactly what it was built to do. It quietly compounds your principal at a reliable 5% clip, completely insulated from the volatile overnight air pockets currently hitting expensive tech stocks.