Page 67 - Ready Set Retire

Ready. Set. Retire!

provide the necessary safety along with growth that you must
achieve to have the retirement of your dreams. This was
gospel. It was unshakeable truth.

Unshakeable, until 2008. Have you ever known anyone who
lost money in bonds? Most people will say yes to this question.
Most people lost a substantial portion of their savings during
the meltdown of 2008 whether they were in bonds or stocks.

Bonds are not safe. Somehow, they got branded safe because
they have a fixed income component. You buy a $1,000 bond
at five percent and you know you will get that $50 a year if you
hold the bond, unless the company closes, and then you are in
the same boat as all the other creditors. Or, unless interest rates
go down and your bonds are called! (Hard to catch a break,
here, isn’t it!)

As a bond holder, you are just a creditor, and if you hold a
debenture bond, an unsecured creditor. And companies close,
and so do municipalities. Remember Enron? How about
Orange County? Detroit? Fresno? I lived in Orange County
when it declared bankruptcy, when one of the richest counties
in the nation defaulted on its bondholders.

Not only is it a debt instrument, but a bond is a security (I
never understood why the call these things securities; I think

57