Should Kimberly-Clark Retirees Buy Ultra-Long Treasury “Zeros”? Read This First

Healthcare Provider Update: Healthcare Provider for Kimberly-Clark: Kimberly-Clark does not typically provide direct healthcare services as a core aspect of its business. However, it does offer healthcare products under its brand portfolio, which includes items like medical gloves and protective wear used in various healthcare settings. The company primarily focuses on consumer products in personal care and hygiene, and while it may collaborate with organizations in the healthcare sector, it is not a traditional healthcare provider. Potential Healthcare Cost Increases for Kimberly-Clark in 2026: As we approach 2026, Kimberly-Clark and its consumers may face significant increases in healthcare costs due to anticipated steep hikes in health insurance premiums. The Affordable Care Act (ACA) marketplace is expected to see rate increases exceeding 60% in certain regions, driven by factors such as rising medical costs and potential loss of enhanced federal premium subsidies. Without intervention, these escalating premiums could drastically affect affordability for millions, with some policyholders at risk of experiencing up to a 75% rise in out-of-pocket expenses. This perfect storm of rising costs could pressure both Kimberly-Clark's employees and consumers, impacting the overall demand for its healthcare-related products. Click here to learn more

'Ultra-long zero-coupon bonds highlight how crucial it is for Kimberly-Clark employees to align investments with their retirement timelines, as inflation and rate risk can erode value over decades.' – Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement.

'Kimberly-Clark employees should recognize that while ultra-long zero-coupon bonds may eventually return full value, the lack of interim income and inflation risk can make them unsuitable for stable retirement planning.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

1. The hidden risks of ultra-long zero-coupon Treasury bonds.

2. How inflation and taxes impact retirement income planning.

3. Alternatives for Kimberly-Clark retirees seeking stable cash flow.

An Inside Look at Bonds

Bonds have long been considered a stabilizing element for retirement portfolios. After all, high-quality fixed income instruments often provide reliable income, diversification, and some protection from stock market swings. However, not all bonds are created equal. Risks tied to certain types—including ultra-long, zero-coupon Treasury bonds, which can stretch out for 30 years or more—should be understood by Kimberly-Clark employees preparing for retirement.

Even though these investments are promoted as discounted options that pay full face value at maturity, they may not be the best fit for retirement income planning. A closer look shows ultra-long zero-coupon bonds can leave investors exposed to heightened interest rate risk, inflation erosion, and complicated tax treatment.

Why “Zeros” at Deep Discount Could Be Deceptive

Zero-coupon Treasury bonds do not pay interest during their lifespan. Instead, they are purchased at a discount and redeemed at face value when they mature. For example, someone might buy a bond now for $24 and receive $100 in 2055. Although this may seem tempting on its face, there are challenges to consider.

Rate sensitivity (duration):  Because all cash flow comes only at maturity, these bonds are extremely sensitive to long-term rate changes. A single percentage point rise in yields can drop a $24 bond’s value to $17—a fall of more than 30%. Retirees who need stability may lack the horizon to recover from these swings.

Inflation erosion:  Even if held to maturity, the payout may fail to deliver the real value expected. Thirty years of moderate inflation could reduce $100 in future dollars to $40 or less in today’s purchasing power.

Tax drag:  In taxable accounts, zero-coupon bonds generate “phantom income.” Even though no cash is received until maturity, the IRS taxes the annual accrual. Kimberly-Clark employees who dependon current cash flow may end up paying tax on income they won’t have in hand for decades.

Interest Rate Volatility Versus Credit Risk

It’s important to distinguish between interest rate risk and credit risk. U.S. Treasury instruments are backed by the federal government’s full faith and credit, making default nearly non-existent. Yet that backing does not extend to maintaining purchasing power or keeping market value before maturity.

When inflation expectations shift or interest rates go up, 30-year bonds can swing dramatically. Kimberly-Clark retirees should recognize that while redemption at face value is nearly certain it might not meet real spending needs or provide steady cash flow.

Alternatives for Retirement Portfolios

That said, other fixed-income options may align more closely with retirement goals and offer Kimberly-Clark retirees more predictable income:

• Short- to medium-term certificates of deposit (CDs) and Treasurys: Laddering maturities from one to five years can help lower rate risk and deliver more predictable liquidity.

• High-quality short-duration bond funds: These limit volatility while sticking to strong credit standards.

• Treasury Inflation-Protected Securities (TIPS): Adjust with inflation, making them useful when matched to spending timelines.

• I Bonds: Offer inflation adjustment and delayed taxation, though subject to annual purchase limits.

• Cash and money market funds: Keep six to eighteen months of withdrawals readily accessible.

• Municipal bonds (for higher tax brackets): Provide income with favorable tax treatment, especially in high-income tax states.

Handling Current Long-Dated Zero Holdings

Kimberly-Clark employees with ultra-long zero holdings may consider:

• 1. Holding them until maturity: Face value redemption is certain, but inflation erosion and lack of interim cash flow remain issues.

• 2. Reducing or exiting positions: Shift money into assets more suited to income needs, though selling might lead to losses.

• 3. Mixing with TIPS or using a barbell strategy: Combine long-dated holdings with shorter Treasurys and inflation-linked bonds.

• 4. Consulting a tax professional: Address phantom income and consider tactics like tax-loss harvesting.

Tracking the Risk of Bond Portfolios

Good portfolio management for Kimberly-Clark retirees means:

• - Recognizing duration and how assets respond to rate changes.

• - Matching holdings with spending needs—using inflation-linked assets for essentials; using more volatile ones for discretionary spending.

• - Staying focused on long-term objectives rather than reacting to short-term policy news.

Recommendations for Retirement Bond Selection

Kimberly-Clark retirees may be able to improve their bond approaches by:

• - Favoring steady cash flow rather than speculative growth.

• - Matching bond maturity to personal timelines.

• - Keeping purchasing power intact by using inflation-linked assets like TIPS and I bonds.

A Framework for Illustrative Allocation

A balanced allocation might include:

• - 12 months’ expected withdrawals in cash or money markets.

• - A one- to five-year Treasury or CD ladder.

• - TIPS for 20-40% of fixed-income allocation.

• - The rest in short- to intermediate-term bond funds.

• - Little or no ultra-long zero-coupon holdings, except for small, speculative positions.

Important Takeaway

Even though ultra-long zero-coupon Treasurys are government backed, they carry risks that can work against retirement goals: high volatility, inflation erosion, and no interim income. For Kimberly-Clark retirees, they are less reliable for steady income than diversified approaches that include cash reserves, shorter ladders, and inflation-linked holdings.

Purchasing ultra-long zeros is like planting a tree that won’t bear fruit for 30 years. While it will eventually yield, there’s no benefit in the meantime, and storms—like rising rates—may nearly topple it, while inflation eats away at its roots. Choosing TIPS, shorter bonds, and ladders is more like tending an orchard where trees ripen at different times, offering steady harvests and cover when needed most.

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Sources:

1. Internal Revenue Service.  Publication 550: Investment Income (and Expenses).  U.S. Department of the Treasury, 2024, pp. 17–18, 65, 75–76.

2. U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy. “ What Are Corporate Bonds? ” SEC, n.d., pp. 1–3.

3. U.S. Department of the Treasury. “ Treasury Inflation-Protected Securities (TIPS). ” TreasuryDirect, n.d., n.p.

4. Fidelity Investments. “ How to Earn Steady Income with Bonds (Bond Ladder Strategy). ”  Fidelity Viewpoints,  4 Oct. 2024, n.p.

5. Federal Reserve Bank of New York. “ Treasury Term Premia. ” Federal Reserve Bank of New York, n.d., n.p.