Retirees Can No Longer Afford to Live on Fixed-Income Investments, S&P Capital IQ and SNL Research Finds

Seven-Figure Investment Principal Now Required to Generate Retirement Income Equivalent to Half of Median U.S. Household Income

Dec 15, 2015 / 11:30 AM
New York, NY

S&P Capital IQ and SNL, a business unit of McGraw Hill Financial (NYSE:MHFI) and a leading provider of research, analytics and data, released a new research note today which highlights the impact of several years of historically low interest rates on retirement income.

The report, Retirees Can No Longer Afford to Live on Investment-Grade Fixed Income Returns, analyzes the annual cash flow generated by the 10-year U.S. Treasury note per calendar year, dating back to 1976.  Tracking total inflation- and risk-adjusted retirement income generated from a $100,000 principal investment, the research finds that retiree nest eggs now need to be much larger than what was required 40 years ago to generate the same level of investment income.

Following were the report’s key findings:

More Principal Required to Generate Same Returns: The average annual income generated on an inflation-adjusted $100,000 principal investment in U.S. Treasuries has been 13.3% of median household income between 1976 and 2015.  Based on that 40-year average figure, principal invested in 2015 would need to increase by more than 600% to generate that same level of return.

Seven-Figure Investment Required for Modest Income: In order for the 10-year U.S. Treasury note to generate annual retirement income approximating 50% of median household income, retirees would need a seven-figure investment principal account, or roughly 24 times 2015 median household income levels.

Shrinking Nest Eggs: Not only do current-day retires need an attractive fixed income interest rate, they also need stronger personal income growth that enable adequate lifetime savings, likely driven through self-directed 401-K investments as oppose  to defined benefit employer-funded pensions.

“The last seven years of short-term interest rates at or near zero percent has created some serious problems for retiree and near-retiree investors,” said Michael Thompson, Chairman S&P Investment Advisory Services.  “The net result has been low-risk profile investors moving further and further out on the risk curve, investing in corporate bonds and equities to generate the same level of income they historically earned in the fixed income markets.  Long term, that is not a sustainable solution.”

To access the full research note, please click here.


About S&P Capital IQ and SNL
S&P Capital IQ and SNL Financial, a business unit of McGraw Hill Financial (NYSE:MHFI), is a leading provider of financial and industry data, research, news and analytics to investment professionals, government agencies, corporations, and universities worldwide. The newly combined firm integrates news, comprehensive market and sector-specific data and analytics into a variety of tools to help track performance, generate alpha, identify investment ideas, understand competitive and industry dynamics, perform valuation and assess credit risk. For more information, visit or

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