People reach their peak decision-making abilities sometime in their 50s, and then decline slowly until after age 70, when the decline starts to take off more dramatically. This helps explain why sweepstakes frauds, Nigerian investment schemes and other scams target seniors and retirees.
You probably know that the IRS requires you to start taking mandatory distributions from your IRA when you turn 70 1/2, even if you don’t actually need the money. But can you do a Roth conversion at that late date, and thereby defer distributions forever?
PIMCO has a good article on rising interest rates that you should read and consider.
A reasoned analysis that takes into account historical interest rates, the likely path of rates going forward and the impact of past interest rate rises on returns suggests that rising rates may not be such a threat to bond investors.
Click the above quote to goto the article.
Scott Dauenhauer, CFP, MPAS, AIF
In May of 2013 (and ever since) it has been a fait accompli that interest rates MUST rise. I wrote in “Do Interest Rates Have To Rise Soon” on May 6th, 2013 the following:
I’ve listened to the prognosticators predict higher rates now for almost four years…and rates instead went lower. Are interest rates going to turn around and go up anytime soon? I doubt it.
Turns out that rates did in fact rise soon after I penned this.
My statement wasn’t meant to be a prediction of where rates were going to go, simply an acknowledgment that there was nothing requiring higher rates and in fact there was precedent for lower rates for longer. The ten year sat at about 1.80% when I wrote that post and by then end of 2013 it had risen to just a tad over 3%, quite a big rise in a short period (though not unheard of). Since that time rates have steadily come back down and the ten year now sits about where was back in May 2013. While rates might rise again and the Fed may even raise short-term rates in the near future, there is nothing keeping rates from staying essentially flat or within a small trading range for the foreseeable future. I’m not saying they will or making bets that rates will stay the same or fall, simply repeating my statement from nearly two years ago that there is precedent for these low rates for a longer period then we might expect and saying that “rates must rise” is not supported by history.
Rates might rise, they also might fall – I certainly don’t know where they are going (nor evidently do economists who get paid to make such predictions), but I do know that basing my client’s investment strategy on the “fact” that rates must rise is ignoring the facts.
Is now a great time to buy bonds? Lance Roberts, CEO of StreetTalk Advisors thinks so.
He might be right, but for most people, they should be careful in taking on to much duration risk.
See the link below for what is, in this market, a very contrarian view.
What is important to notice is that there have only been a few times in history that rates have gotten to 4-standard deviations above the long-term moving average. Every single time, as noted by the vertical red dashed lines, such extreme movements in rates has been a peak in rates for the intermediate term. Most recently these extreme spikes were witnessed prior to the recession following the “technology bubble” in 2000 and the “housing bubble / financial crisis” in 2008.
Scott Dauenhauer, CFP, MSFP, AIF