I have a question I can't quite understand from the research I've done. From what I gather, bond funds are supposed to be held in a tax-advantaged account such as a traditional IRA ideally because their income is taxed at the full ordinary income rate. However, if you plan on retiring before the age of 59.5 (let's say age 50), these tax-advantaged accounts aren't touchable until age 59.5... so shouldn't the tax-advantaged accounts keep a higher percentage of equities until they reach their target retirement date? I.e., if you want to have an increasing percentage of bonds as you approach retirement age and you plan for that to be around age 50, wouldn't the bonds needs to be held in a taxable account? If there was a market crash, the bonds would hold their value more but if they are being held in the tax-advantaged accounts, those funds can't be accessed for 9.5 more years.
For someone retiring early, say 5-10 years before retirement (age 40, retiring at 50), would they not want to start adding a bond allocation to their taxable brokerage account?
Let me know if anyone can help me understand this.