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Cramer: There’s something you should know about bonds

(Click for video linked to a searchable transcript of this Mad Money segment)

There's something you should know about bonds. Jim Cramer isn't sure you should lean on them as a big part of your retirement plan.

The Mad Money host knows that may sound heretical – after all there's a good chance your grandparents put all their money in bonds and lived quite nicely in their golden years.

Unfortunately, this isn't your grandparents' market and Cramer believes that putting a lion's share of your retirement money in bonds now won't generate returns that are nearly sizable enough, when you're read to retire.

"Right now the 30-year Treasury, our government's highest-yielding bond, pays a 3.65% yield. Do you know how long it would take for you to double your money with that kind of annual return? Twenty years, that's how long," Cramer noted.

Instead, the Mad Money host believes that the stocks of good companies, with solid management, attractive prospects, strong balance sheets and quality leadership provide the better path to retirement funding.

Jamie Grill | Getty Images

It's an issue that Cramer has addressed before but he felt it warranted further attention after Brandon in Georgia asked what was a good age to move retirement funds into bonds.

Now make no mistake, Cramer understands that stocks present more risk than bonds, at certain points a portfolio of mostly stocks could lose value.

"But your goal with retirement planning is to build a nest egg," Cramer reminded, and that will likely involve calculated risk.

And even if you do nothing more with your money than simply invest in a fund that tracks the S&P over the long-term, Cramer says you'll do better than bonds.

"Rule of thumb, over the long term, you can expect a low-cost S&P 500 index fund to average out to about an 8% return a year. What's that mean from the perspective of your 401k or IRA? It means that, generally speaking, the money you invest in stocks should double every nine years—dramatically better performance than you'd get from Treasury bonds."

And those returns don't begin to take into account funds that track the tech sector or funds that are made up of growth stocks or some other fund that's relatively more aggressive.

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Now that's not to say Cramer wouldn't ever hold bonds. He would - especially as you near retirement age. Here's how Cramer would do it.

Cramer's Suggested Bond Allocation for Retirement

Age
Bond exposure
20-29 0%
30-39 10-20%
40-49 20-30%
50-59 30-40%
60+ 40-50%
retired 60-70%

Again, Cramer would not have any greater exposure to bonds than what's outlined above. "Being too risk-averse in your retirement planning isn't prudent, if anything it's reckless," insisted the "Mad Money" host. Without stocks I just don't think you'll have enough money to retire, at least not the way you want to retire.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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