Bonds Now Make Up Just 8% of the Average Portfolio. What Replaced Them

"The traditional 60/40 portfolio, 60% stocks and 40% bonds, has been the default retirement allocation for decades. Charles Schwab's Modern Wealth Survey 2025 found that 42% of Americans believe that mix is outdated, and the skepticism is sharper among younger investors. 46% of Gen Z and 46% of Millennials agree the model no longer works, compared with 39% of Gen X and 35% of Boomers."

"The bigger number is the consensus on what comes next: 67% of Americans say successful investing today requires looking beyond stocks and bonds. The macro backdrop explains why. The 10-year Treasury yields 4.35% as of April 27, 2026, which sounds attractive until inflation, duration risk, and the 2022 bond drawdown enter the picture."

"Pre-retirees who watched bonds and stocks fall together are looking for diversification that actually diversifies. The Schwab survey breaks down the average portfolio into pieces that already look nothing like 60/40. Stocks make up 25%, mutual funds 13%, bonds 8%, ETFs 6%, real estate 7%, cryptocurrency 10%, alternatives 3%, options and futures 3%."

"For pre-retirees focused on cash flow, the replacement for the bond sleeve typically draws from three buckets: dividend-paying equities, REITs, and covered call strategies. The logic is simple. Bonds were held for income and stability. Dividend equities deliver income with growth. REITs deliver real-estate-linked yield. Covered calls convert equity volatility into premium income."

The 60/40 portfolio has been a common retirement allocation, but many Americans view it as outdated, especially younger investors. A majority say successful investing today requires looking beyond stocks and bonds. Macro conditions contribute to this skepticism, including relatively high 10-year Treasury yields, inflation and duration risk, and the memory of the 2022 bond drawdown. Market volatility has also been elevated at times. Survey results show that many portfolios already differ from 60/40, with meaningful allocations to cryptocurrencies, real estate, and other alternatives. For pre-retirees seeking cash flow, bond replacement often comes from dividend-paying equities, REITs, and covered call strategies that aim to generate income while managing volatility.

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