Even retirees should own some stocks, given that people are living longer than they used to. Consider tax-free bonds. Tax-exempt municipal bonds yield less than taxable bonds, but they can still be the better choice for taxable accounts. That's because tax-frees sometimes net you more income than you'd get from taxable bonds after taxes, provided you're in the 28 percent federal tax bracket or higher. Pay attention to total return, not just yield.
Returns are a slippery matter in the bond world.
If you want capital gains, go long. If rates rise, on the other hand, you lose big, too. If you want steady income, stick with short to medium. Setting priorities 2. Making a budget 3.