Interest Rates Make It Impossible To Save For Retirement – Got Gold?

…”We’re told easy money will bolster the economy as consumers and businesses take advantage of low rates and spend but if you’re trying to save money, this is anything but a boon.”

Michael Maharrey goes on to say in this slightly edited (([ ]) and abridged (…) version of his original article:

“In fact, it is nearly impossible to save for retirement in the current interest rate environment. Today, your average Joe is forced to invest in increasingly riskier assets in order to generate enough money to retire on.”

“This isn’t only a problem for people hoping to save enough money to live comfortably in their golden years. It also bodes poorly for the broader economy. Savings provide resources for capital investment and future economic growth. Lack of saving now could mean a weaker economy later.

How tough is it for savers?

The current interest rate on a 30-year Treasury is currently around 1.5%. Shorter-term yields are lower still. This is a great deal for Uncle Sam who is trying to borrow trillions of dollars to fund its massive budget deficits but not so much for savers who depend on fixed income securities such as government bonds to protect the principal of their savings while also generating income. This was an old-school savings model, but it is virtually impossible to employ this strategy in today’s interest rate environment.

Let’s say you wanted to maintain a retirement income of $30,000 per year.

• You would need to hold at least $2 million in Treasuries to generate that income. For the average working person, simply saving money and “putting it in the bank” or investing in low-risk bonds isn’t a viable strategy.
• As a result, anybody who is serious about saving for retirement is forced to chase yield by investing in much riskier assets – i.e. stocks, junk bonds, mortgage-backed securities, real estate.
• It is possible to find higher yield investing in these assets but…you could end up losing a lot of money as well. Folks on the verge of retiring in 2008 with tens of thousands of dollars in the stock market or real estate know this pain well.

…Not only are savers fighting against low yield; they are also battling the inflation monster. Central banks intentionally devalue their currencies by at least 2% per year. That might not sound like a lot, but over time, that strips away a significant amount of spending power from your savings and now the Federal Reserve has moved the inflation goalposts to allow your money to devalue even faster…

No wonder so many older Americans are drowning in debt. They simply can’t make ends meet and this is one reason to include gold in your portfolio. Historically, gold has served as a hedge against inflation. As the value of fiat currency falls, the price of gold rises.”

Editor’s Note: As noted, the above version of the original article has been edited ([ ]) and abridged (…) for the sake of clarity and brevity. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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(The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)