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What Are Secure Retirement Investments?
When retirement approaches you do not want to have your investments in vehicles that crash like the stock and real estate markets did in 2008. But what are secure retirement investments in today’s world and what sort of returns can you expect. Phy.org discusses the current lack of secure investments and how it is hindering global growth.
Unless you’ve been following the subject closely, you may not have heard of one of the biggest barriers slowing the revival of global economic growth over the last decade. That would be the “safety trap,” a problem arising from a lack of low-risk investments around the world.
To see the problem, recall that after the financial-sector crisis in 2007 and 2008, a large portion of investments people had considered safe-mortgage-backed securities come to mind-were suddenly understood to be risky. And yet, the ensuing flight to safe assets, such as U.S. debt, has come with its own cost. The increased demand for these safer investments keeps interest rates at low levels, to the point where central bankers cannot spur additional economic output by further lowering those rates. This is the “trap” part of the safety trap.
It turns out that the number of safe assets for investors has fallen by about a half in the last ten years. U.S. debt (treasury bills) were and still the safest of the safe but interest rates fall farther and farther as demand for U.S. and other government debt increases. It is certainly wise to put some of your retirement assets in U.S. treasuries in order to preserve capital but what about something that generates a little income along the way. After all people are living longer and longer so you don’t want to run out of money when you still have twenty or thirty years of life ahead of you!