First off, the rates are not historically low. Generationally low, but not historically low. Bond returns in the US, 1901 to 2000 was 4.85%, and in the previous century it was 4.99%. The anomaly is the last 30 years.
Having said that, the best predictor of longer bond returns going forward is simply the current yield. It will be somewhere close to that. To base your retirement savings strategy on NEEDING rates to rise is phenomenonally risky.
People do not want to face reality here, because it is so unpleasant. Global growth is stalled, the US is no longer an emerging market (as it was at the beginning of last century) but rather it is the dominant leader of the mature industrialized global economy... forebodes low interest rates and low growth...
As for inflation, yeah, if the dollar tanked and they were printing like crazy, yeah, that would eventually stoke inflation and crank rates up... BUT that pre-retiree would still be hosed because that $55k income that we talked about earlier would not longer be sufficient to support living standard in inflate-o world, so the funding liability would just manifest in a different way...
Hey, look, I am not doing cartwheels about this... believe me. |
