Posted on January 26, 2012, 6:14 pm, by Glassman Wealth Services, under
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Yield drought fatigue syndrome has been on the rise, especially with retirees’ who depend on income from their portfolios to pay for their living expenses. It has affected a lot of other investors who have fled the volatility of the stock market in recent years for less risky assets like Treasuries. And with Ben Bernanke’s latest announcement that the Fed plans to keep interest rates low until at least late 2014, the condition is expected to get worse.
Since there does not seem to be a cure on the horizon, is there at least a remedy that may boost yields for retirees and investors without them having to incur a lot of risk?
Barry Glassman spoke with Sharon Epperson on CNBC’s Power Lunch today about ways to overcome this lack of yield. In the interview, Barry points out 4 things retirees and investors can do now to potentially improve their investment income. Click HERE to see the interview.
Our research paper, ”Yield Drought – Retirees Greatest Challenge,” first published in June, 2010, takes an in-depth look at the causes of our yield drought, and why Barry said then that it would “exist for longer than most retirees believe, and perhaps longer than they can afford.” It also explains some yield drought relief strategies. Click HERE for your copy of “Yield Drought – Retirees Greatest Challenge”
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Posted on December 1, 2011, 3:50 pm, by Glassman Wealth Services, under
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I had a conversation recently with John Waggoner, the personal finance columnist for USA Today where we talked about the assumptions that many people still make about retirement, such as retirees will spend less money in retirement (they don’t), they can safely withdraw 4%-5% each year for living expenses (it depends), and the need to diversify investments and save more (always a good idea.) To read the entire article, click HERE.
Posted on August 10, 2011, 6:54 pm, by Glassman Wealth Services, under
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Copyright Glassman Wealth Services®, LLC
With Ben Bernanke’s announcement yesterday that the Fed intends to keep rates near zero for the next two years, retirees and those who depend on income from their savings remain in a yield drought wasteland with no apparent end in sight.
The Glassman Wealth Services white paper, The Yield Drought – Retirees’ Greatest Challenge reveals the significant challenges created by the Fed’s policy “…the current low-interest rate environment may exist for longer than most retirees believe, and perhaps longer than they can afford.”
It also presents strategies that may potentially boost returns without significantly increasing stock market or interest rate risk “…The yield drought is here for the foreseeable future and investors need to be proactive and position their fixed-income portfolios with a well-planned strategy.”
Click on the cover to receive your copy
Posted on January 13, 2011, 8:50 pm, by Glassman Wealth Services, under
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Barry Glassman, CFP talks to Mark Miller of Reuters about how rising interest rates could yield a big change in retirement security.
Dec 30, 2010 08:03 EST
The recent bond market rout may be bad news for bond investors and anyone planning to refinance a mortgage anytime soon. And it’s certainly not what Federal Reserve Chairman Ben Bernanke had in mind when the Fed launched its massive $600 billion bond-buying spree.But if the trend toward higher interest rates continues, it will be very good news for retirees starved for low-risk return on their portfolios.
Ultra-low interest rates have helped banks, corporations and government to stabilize in the wake of the 2008 financial crisis, but they’ve been nothing but bad news for retirees. People living on fixed incomes have been forced to cut expenses, eat into principle or rely on higher-risk fixed income investments or stocks.
The problem isn’t limited to interest rates. The erosion of traditional defined benefit pensions means that just 20 percent of private sector workers can count on monthly pension income. And Social Security is replacing a smaller percentage of income due to the increasing full retirement age implemented in 1983, rising Medicare Part B premium deductions and more Social Security income is subject to income tax.
Inflation also poses a big threat to retirees. Social Security hasn’t paid a cost-of-living adjustment for the past two years and its formula doesn’t recognize the higher rates of medical inflation experienced by seniors. Near-zero interest rates on money market funds and certificates of deposit exacerbate inflation’s impact.
But rising rates could yield a big change in the outlook for retirement security. Barry Glassman, president of Glassman Wealth Services, thinks that’s just where we’re headed. “We’re coming to an end, in the near term, of the Fed artificially keeping rates low. And high deficits mean the supply of debt from the government won’t stop – but demand from the Fed to buy it will. “That means we’ll see interest rates heading higher – not into the stratosphere, but a plateau higher than we’re at today. It could take 18 to 24 months, or it could happen in six months.”
Glassman argues that “retirement could be saved for a lot of people” if long-term certificates of deposit get to five percent sometime in the two years. “If retirees can earn 5 percent with very low risk, that will be very competitive with a higher-risk option like stocks. At that interest rate, there will be a huge wave of demand from retirees who will want to lock in at that rate for 10 years. They’ll take money out of money markets and the stock market to do it.”
If Glassman is right, this could represent a huge shift in the investment landscape as the baby boomer age wave accelerates and demand for low-risk investments accelerate. As Glassman puts it: “Five percent is the new eight percent.”
What will higher rates mean for housing? Not much, Glassman argues. He thinks most people who can refinance their mortgages already have done so. And the government can’t keep rates at ultra-low levels indefinitely in hopes that housing will recover. “Housing’s recovery will be much more sensitive to employment than interest rates,” he says. “Getting the jobless rate down will do more for housing than anything else.”
Posted on October 11, 2010, 5:55 pm, by Glassman Wealth Services, under
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The Yield Drought – Retirees’ Greatest Challenge
The US government continues to bail out banks, homeowners and the economy at the expense of retirees and conservative investors. As a result, we are suffering from a serious yield drought. Glassman Wealth Services’ white paper explains the reasons for our current low-yield environment and the strategies we use to bring relief to retirees and those who rely on income producing assets. Click Here to receive your free white paper.
