For decades, investors approaching retirement have been told that a balanced portfolio of 60% stocks and 40% bonds can help manage risk. The idea seems straightforward: When stocks struggle, bonds can provide stability.

But what happens when both decline at the same time?

That's exactly what investors experienced in 2022, when rising interest rates sent bond prices falling while stocks also suffered significant losses.

For retirees and those nearing retirement, it raised an important question: Is your investment strategy prepared for the unexpected?

Why Stocks and Bonds Both Fell in 2022

Bonds are often viewed as safer investments than stocks. However, they carry risks that aren't always obvious.

One of the biggest is interest rate risk.

When interest rates rise, newly issued bonds typically offer higher yields. That makes older bonds paying lower interest rates less attractive, causing their market values to decline.

Imagine owning a bond paying 3% interest. If new bonds become available paying 5%, an investor would generally be unwilling to pay full price for your lower-yielding bond.

To sell it, you may need to accept a lower price.

That's what happened across bond markets in 2022. As the Federal Reserve raised interest rates aggressively, many bond funds experienced substantial losses.

For investors depending on bonds to balance stock market volatility, the experience was particularly unsettling.

The Hidden Danger of Chasing Higher Yields

When investors see opportunities to earn higher interest rates, it's tempting to move money into investments offering better returns.

But higher yields often come with additional risks.

Those risks might include greater exposure to interest rate changes, lower credit quality, or investments that are harder to sell without taking a loss.

When you're accumulating wealth, you may have time to recover from setbacks.

When you're approaching retirement, however, protecting the money you'll need for living expenses becomes increasingly important.

Sometimes accepting a lower potential return is a deliberate decision to reduce risk.

The question isn't simply how much your investments can earn. It's whether you're taking an appropriate amount of risk to achieve those returns.

Could Stagflation Make Things Worse?

Another concern for retirees is stagflation, a difficult economic environment characterized by persistent inflation and stagnant economic growth.

Consider what that could mean for your retirement.

Your living expenses continue increasing, reducing your purchasing power. At the same time, slowing economic growth can create challenges for corporate profits and investment performance.

You could find yourself needing to withdraw more money from retirement accounts while your investments are experiencing losses.

That combination can place additional pressure on savings intended to last decades.

What About the AI-Driven Stock Market?

Today's investment landscape introduces another concern: market concentration.

A relatively small group of large technology companies, many associated with artificial intelligence, has contributed substantially to stock market performance.

While AI presents significant opportunities, concentrating too much of a portfolio in one sector or investment theme can create vulnerabilities.

Strong recent performance doesn't eliminate the possibility of future volatility.

For retirement investors, the lesson is simple: Diversification should be about managing different sources of risk, not merely owning more investments.

A Different Approach to Retirement Planning

This is why I emphasize risk management through our 321 retirement planning approach.

The strategy organizes retirement assets into three buckets based on different time horizons, with each bucket using at least two complementary investment strategies.

The goal is to address immediate income needs while maintaining flexibility for longer-term growth and changing market conditions.

No investment strategy can eliminate losses or guarantee results. But thoughtful planning can help reduce reliance on any single economic outcome.

Your retirement shouldn't depend on everything going according to plan.

If you're approaching retirement, now is an opportunity to evaluate your portfolio's risks, income needs, and ability to withstand changing markets.

Schedule a consultation with Leibel Sternbach to discuss your retirement goals and explore whether your current investment strategy aligns with your needs.

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