Inflation is eating part of your retirement plan. Sure, it looks like investment grade (IG) corporate bonds have a nice, fat yield over Treasuries, but it’s not enough.

When inflation expectations are factored in, IG corporate bonds are sporting a negative real yield. In other words, a retiree’s purchasing power is losing ground with inflation eating up investment returns.

The gravitational pull from the Federal Reserve’s forecast for low interest rates is dragging everything else down, so much so that inflation-beating returns are getting harder to find in fixed-income.

Financial planning that’s relying on bonds and credit to provide a flow of cash to replenish retirement spending is looking more mis-guided.

Goals-based planning, however, would strongly suggest alternative income ideas are required. Horizon Investments’ research leads us to believe the stock market is an important part of a holistic strategy to make sure retirees don’t outlive their money.

This commentary is written by Horizon Investments’ asset management team. For additional commentary and media interviews, please reach out to Chief Investment Officer Scott Ladner at 704-919-3602 or sladner@horizoninvestments.com.