Bonds are often seen as the safe middle ground, not as volatile as stocks, but with better returns than holding cash in the bank. In this experiment, we’re referring to 10-year U.S. Treasury bonds — the benchmark for “risk-free” assets. You lend money to the government for ten years and earn a fixed annual yield, like 2% or 3%, until your principal is returned.
Now, think about inflation as the quiet thief of retirement. Imagine you’re saving $1,000 a month today. That $1,000 might afford you a few vacations a year, good meals out, and a comfortable life.
Fast forward ten years — even if you’ve saved diligently, the same $1,000 no longer stretches as far. The flights cost more, hotel rooms are pricier, and your “comfortable life” quietly downgrades itself. Saving money without accounting for inflation means you’re planning for a smaller version of your future.
Ten years later, you may have questioned your plan on saving for a future where you could have enjoy the fruits of your labour earlier on in your life.
Now to test how much bonds protect against that erosion, I ran a simple experiment. Starting in 2016, I invested $10,000 a year into 10-year Treasury bonds, each year earning that year’s average yield. For comparison, I also imagined doing nothing — just holding the same $10,000 cash each year.
Annual Average 10y Treasury Yield https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
To understand why, you need to know how bond prices move. When yields fall, existing bonds with higher interest rates become more valuable so their prices go up. When yields rise, older bonds paying lower rates become less attractive, and their prices drop. It’s an inverse relationship: yield up, price down and vice versa.
In 2021, yields plunged below 1% as the pandemic hit, the Federal Reserve slashed interest rates, and investors fled to safety. But by 2023, inflation surged and the Fed reversed course — hiking rates to slow the economy. Yields climbed rapidly, driving bond prices down. Investors who bought bonds during the low-rate years saw paper losses as new bonds offered much higher returns.
Inflation Rate of past 10 years https://www.usinflationcalculator.com/inflation/current-inflation-rates/
| Year | 10Y Yield | Est. Annual Return | Total Invested | Est. Portfolio Value (Cumulative) |
|---|---|---|---|---|
| 2015 | 2.14% | 2.14% | $10,000 | $10,214 |
| 2016 | 1.84% | 1.84% | $20,000 | $20,584 |
| 2017 | 2.33% | 2.33% | $30,000 | $31,214 |
| 2018 | 2.91% | 2.91% | $40,000 | $42,164 |
| 2019 | 2.14% | 2.14% | $50,000 | $53,318 |
| 2020 | 0.89% | 0.89% | $60,000 | $64,132 |
| 2021 | 1.45% | 1.45% | $70,000 | $75,348 |
| 2022 | 2.95% | 2.95% | $80,000 | $88,005 |
| 2023 | 3.96% | 3.96% | $90,000 | $102,160 |
| 2024 | 4.21% | 4.21% | $100,000 | $117,177 |
Table of the Bond Ladder Portfolio (Profits are reinvested to compound)
| Measure | Cash | Bonds Ladder + Compounding |
|---|---|---|
| Nominal Total | $100K | ~$118K–$120K |
| Real (Inflation-Adjusted) | ~$62K | ~$99K–$101K |
| Outcome | Huge Lost vs inflation | Roughly break-even |
Over the past decade, playing it safe with Treasuries wasn’t a mistake but it wasn’t a victory either. A disciplined investor who built a 10-year Treasury ladder from 2015 to 2024, adding $10,000 each year, would have preserved nearly every dollar of real purchasing power. Bonds quietly did their job: they protected capital through shocks, paid steady income, and softened the blows of inflation and volatility.
But they didn’t grow wealth. Cash holders fell far behind as inflation hollowed out their savings, while bond investors merely stood still.
And yet, standing still isn’t the worst outcome. Because if your goal was to retire comfortably and live the life you had planned, this strategy delivered. Your money didn’t lose its value, and you can still afford the same lifestyle — provided you haven’t unknowingly inflated it along the way.
In hindsight, safety didn’t make you richer, but it kept you whole.