Are Stocks Still Good for the Long Run?

Standard fixed-rate bonds can be devalued by inflation (a bond that pays 5% interest a year is a loser if inflation is 6%), but in 1997 the U.S. government introduced what Bodie considers the perfect risk-free investment, Treasury inflation-protected securities, or TIPS. The interest rate on TIPS rises and falls with the inflation rate. And as far as Bodie is concerned, all retirement-investing advice should come down to this: "If your goal is to maintain your standard of living, then here's how much you should be saving and putting into TIPS," he says. "If you want to save more than that and speculate in the stock market, by all means, do it. But you need to recognize that you can't count on it when you do that."

When I recount this to Siegel, he says, "I like TIPS, but you know what the yields are? Now it's 1.79% for 10 years, totally taxable yield. Compared to 6% [earnings yield] in stocks, that's a huge difference." To follow Bodie's advice, then, you're probably going to need to save a lot more money for retirement than you've been doing. Stocks offer the promise of saving less and ending up with the same retirement income. As millions have discovered over the past nine years, though, it's not a promise you can count on. Where does that leave us? Stocks are still the best investment for the long run. But maybe not for your long run.

TIME.com For more stories on how the economy is affecting the average American, visit time.com/moneyandmain