Salient to Investors:

The traditional move to fixed-income-heavy asset allocation in retirement planning poses risks and limitations, especially given expanding life expectancy. 

First, today’s unconventional monetary policy raises the inflation risk. Second, long-duration government bonds and high-grade debt carry the risk of capital loss.

A 10-year Treasury and similar debt could decline more than 25% if long-term rates reverted to levels of the early 2000s.

Retirees should consider capital appreciation as an investment objective in addition to income generation, highlighting the role of equities alongside fixed income.

Dividend-paying equities, in particular, are well-suited to a portfolio managed for both capital appreciation and income.

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