U.S. savers and retired investors who planned to fund their retirement with their life’s savings have been savaged by the Fed’s ultra-low interest rate policy. Yellen & Co., insist on subsidizing big banks and other borrowers with ultra-low rates in an effort to stimulate growth. That effort has clearly fallen flat by any reasonable measure of success.
The Fed’s policies have helped knock the yield on 10-year Treasury securities down to a mere 1.70%. You have to save a lot more or plan to spend a lot less if you are going to fund your retirement with a 1.70% yield. But as bad as a 1.70% yield on 10-year Treasuries may sound, it could be worse. A lot worse. If you were a retired investor in Germany you would be looking at a 0.05% yield on 10-year German government bonds.
Do you know how little income a $1,000,000 portfolio of 10-year German Government bonds generates today?
A whopping $500 dollars. That’s about enough to treat you and the Mrs. to the pick-two menu at McDonald’s once a week.
Somehow, millionaire just doesn’t sound so impressive anymore—especially in German.
Jeremy Jones, CFA
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