Since the “Financial Crisis,” the hope was that inflating asset prices would trickle down into economic growth. Unfortunately, after a decade of monetary interventions and artificially suppressed interest rates, the wealth gap has exploded. More problematic is the Fed has forced investors to take on excess risk due to the lack of alternatives.

No Return

I previously wrote an article on retirees’ primary problem: the 4% Rule is dead. To wit:

The 4% Rule has long been used as a guideline for retirees in determining how much they should be able to withdraw from their retirement account while still maintaining a balance that will allow for the same income stream to flow through their golden years.”

The 4% rule originally suggested that once retired; portfolio allocations shift to ultra-safe Treasury bonds. Such an allocation shift provides for the income required to live on, plus a guarantee of the principal.

Here’s the problem.

When the 4% rule originated, Treasury yields were 5%. Today, they are just slightly above historic lows set during 2020.

Fed Investors Excess Risk, The Fed Has Forced Investors To Take On Excess Risk

Such is a massive problem for retirees today. As shown, $1 million will no longer generate a $50,000 income for retirement. Today, it is just $17,250/year, much better than the paltry $5500 set at the lows in 2020.