In his latest ‘Outside The Box’ newsletter (link is to an Adobe Acrobat document in .PDF format), John Mauldin presents a guest post outlining how the Fed’s insistence on low interest rates has destroyed the capital of those saving for retirement, and driven many of them, seeking greater security, into the bond market – a market that’s tottering right now.
Here’s an excerpt from the introduction. I’ve included links for non-US readers who may not be familiar with all the terms used.
Retirement can be an unpleasant prospect if you’re not ready for it. This week’s Outside the Box is an in-depth report on Americans’ retirement prospects … It’s not just the Boomers who are trying (often in vain) to retire this decade; it’s also Gen-Xers, who are the most indebted generation (and the one that saw their assets depreciate the most in the Great Recession). The Millennials haven’t been spared, either; in fact, over time they may be the hardest-hit, since near-zero interest rates are keeping them from compounding their savings in the early years of their careers, when the power of compounding is greatest. In addition, the difficult post-college job market and sky-high levels of student loans have kept most Millennials out of the stock market, and they are far less likely than previous generations to open a retirement savings account.
This is not a problem the government is going to be able to fix. One way and another, Social Security will do less for people in coming years, not more. We are all going to be more dependent upon our own resources if we want to have anything that resembles what we have come to think of as a secure and comfortable retirement.
There’s more at the link. Recommended reading . . . albeit very worrying if you’re anywhere near retirement age, and/or are depending on Social Security to provide for your declining years. As for me, I’d better write more books, pronto!