---
title: Eagle Asset Management - Interest Rates and Your Retirement Plan
description: Are low interest rates forcing more retirement saving? Eagle Asset Management's Richard Skeppstrom analyzes this in their July Market Perspective.
image: http://www.wrapmanager.com/hubfs/MM_Logo_Images/EagleAssetManagementLogo-1.jpg
---

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# Eagle Asset Management - Interest Rates and Your Retirement Plan

Posted by [ WrapManager's Investment Policy Committee](https://www.letsassemble.com/wealth-management-blog/author/wrapmanagers-investment-policy-committee)  
 July 9, 2015

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![EagleAssetManagementLogo-1](http://www.wrapmanager.com/hubfs/MM_Logo_Images/EagleAssetManagementLogo-1.jpg)[Eagle Asset Management's](http://www.wrapmanager.com/wealth-management-blog/topic/eagle-asset-management-inc) Richard Skeppstrom provides his market perspective for July.

### "Prudence is restraining growth?

Second-quarter domestic economic growth  has not bounced as much as expected. That’s  curious because the weather has improved  and the collapse in the price of oil put money  in folks’ pockets. I’ve read in a few different  places that we are saving the money that  we would have spent on fuel. Saving? Like,  not spending? Frankly, I’d dismissed the  whole notion as absurd. Americans spend.  However, that was until I saw a brief note  describing Larry Fink’s theory on the matter.  He’s the maestro of BlackRock and I pay  attention when he speaks (he manages a few trillion dollars more than me). Mr. Fink  believes very low interest rates are forcing  people to save more for retirement. That’s  entirely logical but hard to embrace since we  (a large swath of the adult population) have  ignored the economic realities of retirement  for as long as I can remember.  

Perhaps years of inadequate fixed-income returns finally have frightened people into action. If that’s the case, there’s an unfortunate self-fulfilling aspect to this. More saving and less consumption depresses  growth and [interest rates](http://www.wrapmanager.com/wealth-management-blog/the-impact-of-rising-interest-rates-on-your-portfolio). And there is precedent. My favorite China analyst, Michael Pettis, often described a similar effect: China kept bank-deposit rates unnaturally low to spur investment spending but this robbed  consumers of adequate savings growth that – in turn – caused them to save even more, depressing consumption. This is a devil of a problem to solve because higher rates will simply choke off growth, or worse if you’ve borrowed foolishly.  

The U.S. and Chinese economies are radically different, of course, but the point is that if you depress returns, you will eventually force more saving as the population is left with no alternative but to adjust. If this is, in fact,  what is restraining our economy then it’s a  permanent headache for just about everyone  and a serious migraine for those facing  retirement. And assuming equity returns will  also be restrained – something I’ve argued for  a while – the effect isn’t likely to abate. I’m hard-pressed to find a bright side to this. Ah, but there is one … if you’re Mr. Fink. Who’s going to manage all those savings? His firm  doesn’t manage all the money but it’s not for lack of trying.  

This argument will gain wide attention if economic growth remains subdued and savings elevated. Let’s hope Mr. Fink is only half right (an insult to his batting average)  and other forces (e.g., housing formation)  overcome the drag.  

Thank you for taking the time to read this month’s Market Perspective. I hope you found  it helpful." Download the report below.

![pdficon](http://www.wrapmanager.com/hs-fs/hub/10700/file-2346359955-gif/blog-files/pdficon.gif)[ Download Eagle Asset Management's Commentary Here](http://www.wrapmanager.com/hubfs/MM_Commentary_PDFs/Eagle_Asset_Management_July2015_Market_Perspective.pdf)

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