The Center for Retirement Research at Boston College has released a study that highlights the need for a greater focus on the use of bonds in retirement.
The study indicates that 86 percent of households approaching retirement hold a bank account, while only 33 percent own stocks directly and only 7 percent own bonds directly.
The author suggests that the focus on safe, highly liquid accounts that provide a guaranteed return of capital is short-sighted and often risky.
The notion of a return on invested capital with return of capital only at maturity is seen as a preferred option.
In other words, retirees should prefer a portfolio of bonds--ideally inflation protected through TIPS--that provide both the return on invested capital as well as the return of capital at the bond's maturity date.
Source: Center for Retirement Research at Boston College
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