The current yield on a one-year U.S. Treasury bond is 4%.

But the yield on a 10-year treasury bond is only 3.5%.

Why is this?

What does it mean for retirement savers and how should investors respond?

That's what I'm tackling today on the show.

To grab the links and resources mentioned, just head over to you staywealthy.com forward slash 168.

The risk-free rate is the rate of return offered by an investment that theoretically carries zero risk.

I say theoretically because in practice, the risk-free rate of return doesn't truly exist, since every investment

out there carries at least some form of risk, even if it's not in the traditional sense.

But for U.S. investors, the yield on a short-term U.S. Treasury bond is often used as the risk-free

rate. And that's because an investment in a U.S. Treasury bill or U.S.

Treasury bond is backed by the full faith and credit of the United States and therefore is deemed

one of the safest investments that one can make. For today's episode, we're going to use the

yield on a one-year U.S. Treasury bond as a reflection of the current risk-free rate. And as stated at the top of the show, the current yield on a one-year U.S. Treasury bond as a reflection of the current risk-free rate. And as stated at the top of the show, the current yield on a one-year U.S.

treasury bond, i.e. the risk-free rate, is 4%.

This means that if you invest $100,000 into a one-year U.S. Treasury bond today,

you'll have earned $4,000 of interest when that bond matures in 12 months without

taking really any investment risk.

On the other hand, if you invest $100,000 into a 10-year U.S. Treasury bond, you'll only be

earning $3,500 every 12 months in interest for the next decade.

And that's because a 10-year U.S.

Treasury bond is currently yielding 3.5% percent, half of a percent less than the one-year bond.

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