As more and more Baby Boomers move into retirement, we’re seeing dire trends for those who rely on fixed income investments to support themselves. Many retirees who rely on different types of income are now finding that they don’t have enough to even maintain a modest lifestyle. Now a new study has found that retirees need in excess of $1 million just to live modestly in retirement on fixed income investments.

Seniors finding themselves unable to retire

In other words, the size of retirement savings now must be almost four times bigger than what was needed 40 years ago for retirees to be able to generate the same levels of “low-risk inflation-adjusted investment income. The reason is because of how low interest rates have remained over the last seven years, which has frequently resulted in negative bond yields when adjusted for inflation.

Michael Thompson, Chairman of S&P Capital IQ’s Investment Advisory Services, has been studying the impact of super low interest rates on retiree and near-retiree income for several years. After crunching some numbers, he and his team said that a principal investment of $100,000 (inflation-adjusted) into U.S. Treasuries has been only 13.3% of the median household income between 1976 and 2015. This means that a principal amount invested this year must increase by over 600% in order for retirees to see the same level of return.

Fixed income investments just not enough

Starting in 1976, a fixed-income investment into a 10-year Treasury note amounts to 16.4% of the median household income for that year. The percentage peaked in 1981 at 31.3% but since then has plunged to only 3.4% in 2012. S&P Capital IQ expects this rate to fall to 3.9% this year.

Fixed Income Investments

To bring retirement income from the 10-year Treasury notes up to about half of the median household income, a seven-figure principal investment is needed. That’s about 24 times this year’s median household income.

Fixed Income Investments

But the problem doesn’t stop with fixed income investments as other retirement trends are also impacting seniors negatively.

“The plight of modern-day retirees is actually much worse than these face-value comparisons with earlier decades might suggest because employees have steadily migrated from defined benefit employer-funded pension obligations toward self-directed defined contribution individual retirement arrangements and 401(k) accounts,” said Thompson in his report. “Often in earlier decades, retirement account investment income would only be supplementing primary defined benefit and social security benefits, which would provide a comfortable standard of living for retiring senior citizens.”

Thompson expects this problem to improve slowly as the Fed gradually normalizes interest rates. However, those who have already been through more than five years of “historically low, and often inadequate, fixed income yields” may not see benefits because of how slowly recovery is expected to go.

Images in this article are courtesy S&P Capital IQ.