Low-Yield Bonds Could Making Saving For Retirement Harder


Saving for retirement will become harder due to less supply of bonds and their lower yields.

Typically, fixed income assets are seen as a smart investment that would lead to retirement savings in the long term. However, those who are nearing retirement do not have the time to accumulate the generated income from fixed-income assets.

Additionally, even if those nearing retirement had the time for long-term investments, they simply aren’t as lucrative as they used to be. Rick Rieder, the global chief investment officer at BlackRock’s fixed income business believes that the large number of people approaching retirement will create a shortage gap between the supply and demand of high-yielding assets that are also not excessively risking.

More specifically, Rieder believes that the number of individuals reaching retirement every half year will be 1.8 million people. As all these individuals come closer to retirement, they will start making investments hoping to financially cushion their final years.

"That outsized demand will clash with a sobering decline in the net new supply of yielding assets," Rieder said.

Fixed-income securities are yielding less, at nearly 100 basis points lower than twelve months ago with a decreased estimated issuance rate that drops 30% in the coming year.

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Economics, Finance and Investing