Not Everyone Is Excited About The Low Interest Rates

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Baby Boomers are not nearly as excited about low interest rates as Millennials, and for good reason

July 18, 2016

Pixabay Public Domain

One of the biggest disconnects between the Baby Boomer and Millennial generations comes from the economic and financial times in which they have lived. Baby Boomers didn’t have to worry about mountains of student loan debt or a job market where almost every career position requires a college degree, and they have benefited from real GDP growth that averaged almost 3 percent during their working years. The Millennials who are just exiting college and preparing to start their careers or who are trying to buy their first home aren’t experiencing those same situations.

But as qz.com reports, the tables are about to turn, at least in some respects. While Millennials are basking in the beauty of near record low interest rates, retiring Baby Boomers are about to be hurt by those same rates. Baby Boomers are in their peak wealth years, meaning the low interest rates are giving them a low return on savings.

Bonds and annuities, which many recently retired Baby Boomers shift their assets to due to their low risk, are more expensive when yields are low. Some Boomers, then, are keeping their assets in the stock market, hoping the higher risk will give them a higher reward. But a bad day in the market can wipe out retirement savings and leave boomers rushing to pick up the pieces.

While everything seemed to be going right for Boomers for so long, a little bit of adversity is heading their way quickly.

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