Podcast Summary: Ask The Compound – "Is It Time to Buy Bonds?"

Date: September 17, 2025
Hosts: Ben Carlson, Duncan Hill
Guest: Bill Sweet

Episode Overview

This episode of Ask The Compound centers on the current state of the bond market—amidst the worst decade ever for fixed income—and explores whether now is the right time to buy bonds. The panel also tackles a diverse range of listener questions, including advice for young service members, Roth versus traditional 401k decisions, fixed rate versus ARM mortgages, HSA audits, and how to optimize savings for early retirement. The show is characterized by practical, down-to-earth financial advice driven by the hosts' trademark humor and conversational tone.

Key Discussion Points & Insights

1. The Current Bond Market: Is It Time to Buy? [03:42–12:15]

• Listener Rebecca asks if buying bonds in a bear market is akin to "buying stocks on sale." She’s worried about her bond funds’ persistent losses, especially as she contemplates retirement.

• Ben Carlson acknowledges:

  • "This is the worst decade ever for bonds. So far, it's even worse than the inflation-ravaged 1970s, especially on an inflation-adjusted basis."
  • Despite pain in bond prices, a balanced 60/40 portfolio still returned over 9% annually over the past five years, thanks to equities compensating for weak bonds. [05:20]
  • Two fundamentals about bonds:
    1. Rates and prices move in opposite directions—rising rates mean falling prices.
    2. The starting yield is the best predictor of long-term expected return (correlation ≈ 0.93 over history). Current higher yields improve return prospects for new buyers. [08:05]
  • Case against bonds: Potential for further inflation or rising government spending, which could drive yields higher (hurting prices).
  • Case for bonds: Yields are now much more attractive, and bonds still hedge recessions as money flees to safety.

• Memorable Quotes:

  • Ben: “You’re trading short-term pain for long-term gain. The starting yield has gone up, so future returns should be better. But getting there hurt.” [09:55]
  • Duncan: “If you’re new to investing, please understand you can lose money in bonds.” [11:18]
  • Ben (on inflation risk): “The biggest risk for bond investors over the long run is inflation, because you’re only getting your money back in nominal terms.” [11:50]
  • Advice: Investors must now be more thoughtful about bond selection (duration, risk, purpose—income, volatility, liquidity) and overall allocation. [10:45]

2. Investing Advice for Military Service Members [12:18–16:43]

• Listener Dylan mentors young Marines with little financial experience and asks for starting-point advice.

• Bill Sweet (former Army officer) highlights:

  • Military members often start with no student debt, free healthcare, GI Bill eligibility, and tax-advantaged housing—“a pretty good deal” for building wealth. [13:32]
  • Main recommendation: Automation is everything. Enroll in the TSP (Thrift Savings Plan), ideally the Roth option. Pay yourself first—automatic saving is the foundation for financial freedom. [15:20]
  • “Savings ultimately is freedom. And what do Marines love? They love freedom, right?” [15:25]
  • Ben: “Automate your savings right away—Roth IRA, TSP, whatever. Spend what’s left over. Every year, increase savings a little more.” [15:48]
  • Bill: “Everyone spends whatever hits their checking account. The only way people reliably build wealth is by automating out that money before you can spend it. That’s just human nature.” [16:10]

3. Roth vs. Traditional 401k for High Earners [17:08–20:49]

• Listener Matthew (age 32, $300-450k income, heavy Roth contributions) asks when to pivot to traditional 401k contributions.

• Key Points:

  • At his income, Matthew is approaching the highest federal marginal tax brackets (35%+).
  • Bill: “At that tax rate, that’s around the time I’d recommend shifting gears into traditional… especially if you plan on retiring to a lower-tax state.” [19:09]
  • If his income remains high and a future spouse’s earnings are similar, switching now makes sense for tax deferral.
  • Matthew’s “profit interest” likely refers to a real estate partnership equity arrangement.
  • Ben: “He’s probably going to be fine either way. But now’s the right time for a shift.” [20:45]
  • Bill: “I’m not Roth-all-the-time, but I think Matthew’s right on the cusp.” [20:49]

4. 30-Year Fixed vs. 5-Year ARM Mortgages [21:54–26:15]

• Listener David weighs 30-year fixed (6.375%) vs. 5-year ARM (5.875%), inclined to refinance if rates fall.

• Ben:

  • Predicting interest rates is a "fool’s errand," though his gut says they’ll likely fall. Still: “The ARM probably makes more sense if you’re willing to risk they don’t drop, but you get a five-year window, so I’d feel pretty confident.” [23:57]

• Bill Sweet (strong opinion):

  • The 30-year fixed is a “put option,” unique to the U.S. because it’s taxpayer-subsidized. “I would always take the longer option. Rarely does the ARM-to-refinance play tend to work out as planned.” [24:46]
  • “If rates go up—inflation, economic shocks—you could be refinancing at 8%. That’s your risk.” [26:03]
  • Both note the 30-year fixed greatly simplifies planning and came about during the Great Depression for consumer protection.

• Fast debate & jokes:

  • Ben: “You know how rich I am by not drinking coffee? I save $4 every day.” [26:25]
  • The group comments on hyperinflation and housing crises in Canada and Europe.

5. Do Large HSA Withdrawals Trigger IRS Attention? [27:00–30:25]

• Listener Joshua asks if big, unreimbursed HSA (Health Savings Account) distributions ($90,000) could flag the IRS for an audit.

• Bill Sweet:

  • “If you’ve got the receipts—90 pages of PDFs—you’re within the law. Bring the audit.” [28:49]
  • The IRS only cares in case of examination. Huge HSA balances/distributions are rare, but as long as you have qualified receipts, you’re in the clear.
  • “You have the receipts, you’re good to go…the law is the law, and if the law is on your side, you should do what’s right as a taxpayer.” [29:38]

6. Diversifying Pre-Tax, Roth, and Taxable Savings for Early Retirement/CoastFI [31:56–34:16]

• Listener Ryan (health scare at age ~50) wants to shift from Roth 401k to building after-tax/taxable brokerage holdings for more flexibility (currently 23% Roth, 75% pre-tax, 2% taxable).

• Ben:
  For those eyeing early retirement or “CoastFI,” building up the taxable bucket makes sense for liquidity and flexibility, especially with a lopsided allocation. [32:55]

• Bill (“takes the other side”):

  • “No reason to dump money into taxable if you can put more into Roth. In a Roth, all compounding is tax-free, you can rebalance anytime, and you can withdraw your basis at any age after rolling to a Roth IRA.” [33:00]
  • But agrees that, for those expecting to spend within a short timeframe, taxable makes sense.

• Duncan’s counterpoint:

  • “If you think you’ll pick bad stocks, you can tax-loss harvest in taxable.” [34:16]

Notable Quotes & Memorable Moments

• Ben: “If you’re new to investing, please understand you can lose money in bonds.” [11:18]

• Bill (on automation): “Savings ultimately is freedom. And what do Marines love? They love freedom, right?” [15:25]

• Ben (on mortgage choices): “Guessing the direction of mortgage rates is kind of a fool’s errand…I’d feel pretty confident [choosing the ARM], but nothing’s ever certain.” [23:57]

• Bill (on mortgage advice): “The 30-year fixed rate is one of the best things that’s ever happened to American consumers.” [24:46]

• Bill (on HSA audits): “If the law is on your side, I see no reason not to do this all at once. If you have the goods, you have the receipts, knock it out, go for it.” [30:03]

Lighthearted/Community Segments

• Past letter writers update on their real estate ventures—hosts encourage risk-taking while young, but remind listeners not to blame them if it fails.
• Extended debate on the best U.S. military dress uniforms, with a playful poll and military anecdotes from Bill. [34:39–37:19]
• Jokes about coffee prices, Twitter/X blocking sprees, and Popeye.

Timestamps for Important Segments

• [03:42] – Is it time to buy bonds? Bond bear market explained
• [12:18] – Investment advice for military service members (Bill Sweet)
• [17:08] – When to switch from Roth to traditional 401k
• [21:54] – 30-year fixed vs. ARM mortgages
• [27:00] – Large HSA withdrawals and IRS audit risk
• [31:56] – Building up taxable savings for early retirement (CoastFI)
• [34:39] – Best U.S. military uniforms (fun community segment)

Episode Tone & Takeaways

The episode blends hard-hitting investment analysis—especially about the bond market’s historically bad run and what that means for future returns—with candid, practical advice on personal finance. The hosts’ engaging dynamic, sense of humor, and deep understanding of real-world investor psychology make even complex topics accessible.

Listeners are reminded that no asset class is always "safe," automation and discipline trump complicated strategies, and sometimes the best move is simply to "stay the course"—but with open eyes and context for what’s changed in today’s economic landscape.