For retirees getting by on lifetime savings, these are challenging times. Interest rates on Treasuries, municipal bonds and other high-grade paper are so low as to be insulting. The Federal Reserve Board has telegraphed its intent to maintain microscopic short-term interest rates for at least two more years. The interest rate regime is what it is, but what concerns us is that these distortions are encouraging investors to take excessive risk for which they are unlikely to be rewarded. Worse, this form of investor behavior can wreak havoc on the important goal of maintaining purchasing power during retirement.
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