For decades, the standard advice handed to Australians approaching retirement has been some version of the same thing: reduce your risk, move into bonds, protect what you've built. It sounds responsible. It feels cautious in all the right ways. But for most pre-retirees with a genuine investment horizon stretching 20, 30, or even 40 years into the future, it is advice that quietly destroys wealth — and EPG Wealth has been actively working to undo it in client portfolios.

EPG Wealth's Position

We have been actively removing bonds from client portfolios. In our view, for most pre-retirees and long-term investors, bonds represent a structural drag on returns — one that compounds painfully over time and leaves clients significantly worse off than they needed to be. This article explains the evidence behind that position.

1. What Bonds Were Originally Designed to Do

A bond is a loan. You lend money to a government or corporation, receive regular interest payments over a fixed term, and get your capital back at the end. The appeal is straightforward: predictable income, lower volatility, and capital that isn't subject to the day-to-day movements of the sharemarket.

In a specific set of circumstances, bonds serve a purpose. For an investor who is actively drawing down capital right now and genuinely cannot afford a sharp market decline, holding some capital in stable assets makes sense. For institutional investors managing liability-matching requirements against defined benefit obligations, bonds are an essential tool.

But for a 55-year-old Australian building wealth toward a retirement that may last until their late 80s or early 90s? The case for a significant bond allocation falls apart — and the data makes clear why.

2. The Return Gap Is Too Large to Ignore

The fundamental problem with bonds in a long-term portfolio is the return differential between bonds and growth assets. Over long periods, this gap is not marginal — it is substantial, and it compounds relentlessly.

Asset Class Approx. Long-Term Annual Return $100,000 after 20 years
Australian shares ~9–10% p.a. ~$560,000–$670,000
Global shares ~8–10% p.a. ~$465,000–$670,000
Australian listed property (A-REITs) ~7–9% p.a. ~$387,000–$560,000
Australian government bonds ~3–5% p.a. ~$181,000–$265,000
Cash / term deposits ~2–4% p.a. ~$149,000–$219,000

Long-term returns are approximate historical averages. Past performance is not a reliable indicator of future returns. 20-year projections are illustrative only and assume constant annual returns, which will not occur in practice.

The difference between $100,000 in Australian shares and $100,000 in government bonds over 20 years is the difference between roughly $600,000 and roughly $220,000. That is not a marginal drag. That is a fundamental destruction of long-term wealth — and most Australians have no idea it is happening inside their super.

3. The Investment Horizon Most People Get Wrong

The argument for de-risking into bonds is built on a misconception: that your investment horizon ends at retirement. For the vast majority of Australians, it does not.

A 55-year-old retiring at 67 does not have a 12-year investment horizon. They have a horizon that extends until their mid-to-late 80s — or beyond if they are in good health. That is a real investment horizon of 30 to 40 years. Structuring a portfolio as if the horizon is 12 years means systematically underperforming over the 20 to 30 years that follow retirement — decades during which the portfolio still needs to grow to fund living expenses, account for inflation, and preserve wealth for the next generation.

The real horizon for most pre-retirees

A 55-year-old in good health has a reasonable life expectancy extending into their mid-to-late 80s. That means their investment portfolio may need to work for 30 to 35 years — not just until they retire. Structuring a portfolio for a 12-year horizon when the real horizon is three times that length is one of the most costly mistakes in Australian personal finance.

Inflation compounds this problem. Bonds offer almost no real inflation protection. If your portfolio returns 4% and inflation runs at 3%, your real return is barely 1% per year. Over 20 years of retirement, that erosion can leave a retiree materially worse off in real terms — even if the nominal balance looks acceptable on paper.

4. Why the "Safety" of Bonds Is Largely Illusory

The case for bonds rests heavily on the idea of safety — that they protect capital and reduce portfolio volatility. Both claims are true in a narrow sense, but they obscure an important point: the real risk for a long-term investor is not short-term volatility. It is failing to grow wealth fast enough to fund a retirement that could last three decades.

Short-term volatility in a growth-oriented portfolio is uncomfortable. It is not, for most investors, catastrophic. Markets have historically recovered from every major downturn — and for an investor who does not need to sell their growth assets during a downturn, short-term falls are ultimately irrelevant to long-term outcomes. What is genuinely catastrophic is being so heavily weighted toward low-returning defensive assets that your portfolio fails to keep pace with the cost of living over 20 or 30 years.

The EPG Wealth View

For a pre-retiree with a long investment horizon, the risk of holding too many bonds is greater than the risk of holding too few. The volatility of a growth-oriented portfolio is manageable. The compounding cost of 20 or 30 years of sub-par returns is not.

5. What We Replace Bonds With — and Why It Works

When EPG Wealth removes bonds from a client portfolio, we do not simply leave that allocation in cash and walk away. We replace it with a combination of assets that, in our view, better serve the client's long-term objectives — typically a diversified mix of Australian and global equities, listed real assets, and in some cases alternative income-generating investments with better long-term return profiles than bonds. Understanding the importance of asset allocation is central to getting this right.

The shift is not about taking reckless risks. It is about recognising that for most pre-retirees, genuine diversification means exposure to different growth engines — not a false sense of security from assets that are almost certain to underperform over the time horizon that actually matters.

Illustrative Case Study

Sandra, 57 — What Removing Bonds Actually Changed

Sandra came to EPG Wealth with $750,000 in super, split between a default balanced option (which held approximately 40% in bonds and cash) and a separately held investment portfolio with a similar composition. She planned to retire at 67. Her existing portfolio was expected to return approximately 5.5–6% per year on average.

After reviewing her situation, EPG shifted her allocation to a predominantly growth-oriented strategy — around 85% growth assets, 15% in a cash buffer for peace of mind — targeting an average annual return of 8–8.5%.

The modelled difference over 10 years, before further contributions:

Original portfolio at 5.75%: approximately $1,300,000 at age 67.
Revised portfolio at 8.25%: approximately $1,660,000 at age 67.

The difference of approximately $360,000 did not come from a dramatic change in risk profile. It came from removing a structural drag that had no place in a portfolio with a 10-year accumulation horizon and a further 20–25 years of retirement income to fund.

Hypothetical case study using simplified return assumptions. Individual outcomes depend on actual market performance, fees, contributions, and personal circumstances. This is not a projection or guarantee.

6. The Problem With "Balanced" Super Options

Most Australians are in a default super investment option they chose — or more accurately, were placed into — when they first joined a fund. These options are frequently labelled "balanced," which sounds appropriately measured. The reality is often quite different.

Many balanced options hold 40–60% of their assets in bonds and cash. For a member in their 30s or 40s, this is almost certainly too conservative. For a member in their 50s with a retirement horizon of 30 or more years, it may be significantly underperforming their genuine needs — quietly, invisibly, year after year.

The fact that a default option is called "balanced" does not mean it is balanced for your circumstances. It means it was designed to be acceptable to a broad range of members with different needs — which means it is almost certainly not optimised for anyone in particular. It is worth understanding how wrap portfolios compare to industry funds when thinking about whether your current structure is actually serving your goals.

What to actually look for in your super statement

Log into your super account and find your current investment option. Look up the underlying asset allocation — specifically the split between growth assets (Australian shares, international shares, listed property) and defensive assets (bonds, cash). If your defensive allocation is above 25% and you are more than five years from retirement, it may be worth a conversation with an adviser about whether that composition is actually serving your long-term interests.

If you'd like to understand whether your current portfolio is genuinely structured for your retirement timeline — or whether bonds are quietly dragging on your long-term returns — EPG Wealth offers a complimentary 20-minute consultation.

Book a complimentary call with Mark

7. Addressing the Sequence of Returns Concern

The most common objection to removing bonds is sequence of returns risk — the concern that a major market fall in the years immediately before or after retirement could be permanently damaging if the portfolio is fully invested in growth assets. It is a legitimate concern and worth addressing directly.

Sequence of returns risk is real. A significant market decline at the point of retirement, combined with ongoing withdrawals to fund living expenses, can accelerate capital drawdown in a way that is hard to recover from. We do not dismiss this risk.

But the appropriate response to sequence of returns risk is not a 40% bond allocation that drags on returns for decades. It is maintaining a cash buffer — typically one to two years of living expenses — that can fund withdrawals during a market downturn without needing to sell growth assets at depressed prices. Once growth assets recover, the cash buffer is replenished, and the long-term portfolio continues to compound at the higher rate that growth assets deliver over time.

This approach manages the genuine near-term risk without sacrificing the long-term growth that a portfolio with a 30-year horizon actually needs. It is a fundamentally different proposition from holding 30–40% in bonds across the entirety of a portfolio for the entirety of an investment life.

8. The Compounding Cost of Doing Nothing

Perhaps the most important point in this entire discussion is the one that is easiest to miss: the cost of an over-allocation to bonds is largely invisible. It does not appear as a loss on a statement. It shows up as growth that simply never happened — a future balance that is $200,000, $300,000, or $400,000 lower than it could have been, simply because a structural drag was allowed to compound quietly for a decade or two.

Most Australians who have been in a bond-heavy default option for years do not feel like they have made a mistake. Their balance has grown — just not as much as it should have. That invisible underperformance is why this issue rarely prompts urgent action, and why it is one of the most consequential conversations a pre-retiree can have with an adviser.

The Bottom Line

Bonds belong in a narrow set of circumstances. For a long-term investor — and most pre-retirees, with their 30-to-40-year horizons, are long-term investors — a significant bond allocation is a structural impediment to wealth, not a protection of it. The evidence is clear, the arithmetic is straightforward, and the cost of inaction compounds every year.

EPG Wealth has been actively removing bonds from client portfolios because we believe the data supports it and because our clients deserve portfolios that are built for their actual investment horizon — not for an imaginary shorter one. If you have not had this conversation about your own portfolio, it is worth having.