The Baby Boomer Bond Dilemma – The New York Times

Today’s record low bond yields could not come at a worse time for many baby boomers.

Owning U.S. Treasuries, the undisputed safest bond for retirees, means signing on for next to nothing in earnings for the next five to 10 years. That’s because the current yield of a Treasury bond is a solid estimate of future annual returns, and Treasuries that mature in 10 years or less currently have yields below 1 percent.

“I start all my presentations saying, ‘I am sorry but this is going to be super depressing,’” said David Blanchett, head of retirement research at Morningstar’s Investment Management group. While the historical long-term average annual return for intermediate term Treasuries is 4.5 percent, Mr. Blanchett says that based on current yields, a return below 2 percent is more likely.

And that’s before factoring in inflation. The 1.3 percent annual rate of inflation through August, the latest information available, was higher than the 0.3 percent yield for a five-year Treasury note and the 0.7 percent yield for a 10-year Treasury.

Expected low returns for the next five to 10 years come at a crucial time for households near retirement and those who have recently crossed the retirement Rubicon.

“What matters most is what happens to your portfolio in the first 10 years or so of retirement,” said Mr.

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