Today’s historically low interest rates may be just the beginning of the issues facing people nearing or in retirement who have been urged to rely on bonds to fund their golden years.
This white paper examines the effect of today’s low yields on the outlook for bond returns, the potential reduction in income and the lack of portfolio diversification benefits, as well as the relative attractiveness of certain bond alternatives.
- Passively investing in bonds for today’s retirees may increase longevity risk.
- Financial market assumptions for bond returns are poor for the foreseeable future.
- Future returns for popular target date funds are constrained by today’s low bond yields, in stark contrast to strong returns for those funds over the last 20 or 30 years during a bond bull market.
- Bond-like equities have attractive income opportunities
All of the major use cases for passively investing in bonds is challenged by low yields.
Bonds of the Future? We’ll Pass
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