Bond Fund Alternatives for Retirement in 2026

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Bond funds can — and do — lose money when interest rates rise, which surprised many retirees who counted on them for safety. Today, alternatives like MYGAs and fixed index annuities offer something bond funds can't: a guarantee that you won't lose principal, with competitive interest rates or growth potential built in. The Problem With the Old Retirement Formula For decades, the go-to retirement advice was simple: put part of your money in stocks to grow, and put the rest in bonds to keep it safe. This "60/40" approach — 60% stocks, 40% bonds — became the standard playbook for millions of retirees. Then 2022 happened. Interest rates rose sharply, and the "safe" half of the portfolio fell just as hard as stocks. A typical 60/40 portfolio lost around 16% that year. The bond fund portion alone dropped roughly 13%. Many retirees were blindsided — because they thought bonds were their safety net. The lesson isn't that bonds are worthless. It's that they carry a risk most people didn't fully understand: when interest rates go up, bond fund values go down. And that risk is real whether you're 40 or 70 — but it matters a lot more when you're living off your savings. Why 2022 Was a Wake-Up Call The chart below shows what happened to different strategies in 2022, one of the worst years for bond investors in modern history — and why some retirees are rethinking where they keep the "safe" portion of their money. 2022: What Happened When Interest Rates Rose Approximate annual returns by strategy — for educational purposes +8% +4% 0% -4% -8% -12% -16% −16.1% Traditional 60/40 Portfolio (Stocks + Bond Funds) −13.0% Bond Fund Index 0% Fixed Index Annuity (0% floor) +4.8% MYGA 5-yr Fixed Annuity Sources: Bloomberg U.S. Aggregate Bond Index (2022 total return approx. −13%). 60/40 blend is approximate. MYGA rate reflects 5-year market averages in late 2022. FIA 0% floor is contractual; actual credited interest varies by carrier and contract. Past performance does not guarantee future results. Educational purposes only. While bond funds and the 60/40 portfolio posted historic losses, retirees in MYGAs earned a guaranteed, positive return — and those in fixed index annuities simply didn't lose anything. The floor protection kicke