... Retirement ...

Retiring to or in the UK?
Your income without tears

If you live off bank or building society interest, you will need to get used to lower interest rates as debt deflation continues.

If you depend on dividends from shares, what will you do when companies cut their dividends to conserve their cash?

In a deflationary environment, all the traditional income sources have their limitations. Clever ideas by insurance companies merely repackage these underlying investments, at a cost to the investor.

Gilts give guaranteed capital repayment at maturity with guaranteed income that cannot go down during the life of the Gilt. In a deflationary environment, these guarantees are worth more as the years go by. Most people avoid Gilts because they remember the 1960's and 1970's, when gilts were poor value due to inflation. Conditions changed fundamentally in 1982 when the rate of inflation went below the rate of interest.Why weren't the experts telling you to buy and hold Gilts when you could get 12% for 15 years in early 1990?

US Treasury Bonds

US Treasury bonds are similar to Gilts but are based in dollars and therefore capital and income fluctuate according to the exchange rate. If you spend in sterling, then the odds are that over the course of your retirement, the pound will be lower against the US Dollar, so income in dollars may be worth more in sterling. If you plan to travel, or keep a second home in America, Europe or elsewhere, it would be sensible to have some income fixed in dollars. Where appropriate, we recommend investment in US Treasury Bonds.

As interest rates are above the rate of inflation, you have a positive real return on your money.

See also the notice on the homepage.