Outlook for retirees is not rosy

Outlook for retirees is not rosy

Historically, the stock market has outperformed any other investment over any given ten-year period. The same cannot be said for any five-year period.

For this reason, prudent investors invest in equities, then switch to less profitable but more secure investments within a decade from retirement.

The Federal Reserve's policy of manufacturing low public interest rates and public liquidity are changing the equation. The forced lower interest rates have caused those already in retirement to see huge losses due to low interest rates on savings instruments and low yields on treasuries

The Fed's current $4 trillion balance sheet is increasingly viewed as unsustainable, but any policy to restrain or reverse this trend is potentially catastrophic.


In 2013, mere hints at tapering off the Fed's bond purchases resulted in significant losses for many large bond funds. Talk of and eventual enactment of a significant increase in the minimum wage have resulted in the historically repeated and quite predictable result of increasing unemployment and exerting an upward inflationary pressure, leaving those at the very bottom worse off.

This leaves those approaching retirement in the uncomfortable position of having to choose between remaining invested in volatile equities, or choosing the certainty of seeing reduced savings interest and treasury yields lose value to inflation.

Unfortunately, I can see no hope for a long-term solution which does not come with significant short-term hardship for those in the middle class and below. We may finally have reached the point where lottery tickets are a realistic retirement plan.

LANCE BRESEE

Baldwinville