Private Credit for Retirees

Why is private credit suddenly being pitched to retirees, and what does the pitch leave out? The yields look fat next to bonds, the marketing is everywhere, and the salespeople are persuasive. Here’s the part they rush past: your money is locked up, sometimes for years, and you cannot get it out when you decide you need it. For a retiree who lives off their portfolio, that single feature changes everything. I’ll say where I stand plainly. I believe most retirees should not own this.

What private credit is

Private credit means lending money to companies outside the public bond markets, usually through a fund. The fund makes loans, often to mid-sized businesses that can’t or won’t borrow from banks, and passes the interest back to you as income. The headline yields can run well above what investment-grade bonds pay. That spread is the whole sales pitch, and on the surface it’s attractive.

The steel-man, then the dismantle

Let me give the strongest version of the case before I take it apart, because it deserves that.

The argument goes: public markets are increasingly picked over, more companies are staying private, and lending to them captures a real return that’s simply not available in public bonds. There’s an “illiquidity premium,” extra yield you earn for accepting that your money is tied up, and the lockup even saves you from yourself by stopping you from panic-selling in a downturn. That’s the pitch, and parts of it aren’t crazy.

Here’s where it breaks for a retiree. The lockup isn’t a feature, it’s the entire problem. When you actually need the money, in a health crisis, a family emergency, a year your other income falls short, you can’t get it. The fund gates withdrawals, or there’s no market to sell into, and you’re stuck. I watched illiquid assets nearly bankrupt my family in 2008, so this isn’t an abstract concern to me. A retiree’s whole edge is having capital available when life happens. An asset designed to deny you that is working against the one thing you most need.

And the “premium” is murkier than advertised. The valuations are set by the managers themselves, not by a daily market, so the smooth returns are partly an illusion of not being priced. Their markups are buried in fee layers most investors never fully see. When you can’t observe the real price and can’t sell, “low volatility” just means nobody’s telling you what it’s worth.

The conviction, and its limits

I’m absolute on this principle: I don’t manage money for people who can live forever. For most retirees, an asset you can’t sell in a crisis isn’t an income source, it’s a liability wearing an income costume. The flexibility you give up dwarfs the extra yield, and the yield itself may not survive a real credit downturn that the smooth marketing returns have never been tested against.

Now the honest limit, because I won’t manufacture certainty I don’t have. Private credit isn’t fraud, and it isn’t always wrong. For a genuinely institutional investor with a permanent capital base and money they truly will not touch for a decade, a small allocation can make sense. The crime isn’t the asset class. It’s selling a narrow, institutional tool as a broad solution for retirees who need their money liquid. Beware the universal prescription pushed by someone who profits from your signing up and won’t name their own incentive.

What to own instead

If the goal is more income than safe bonds pay, there are liquid ways to reach for it that don’t trap your capital. A bond ladder for retirement income gives you a predictable, sellable income stream. Public high-yield and credit funds offer more yield while still trading daily. And the cheapest income upgrade most retirees ignore is delaying Social Security, which a Social Security bridge strategy turns into the best inflation-protected, government-backed income you can buy. Fit any of these into a tax-efficient withdrawal order and you get the income without the cage.

The yield on private credit is real. So is the lockup, and for a retiree the lockup is the part that can hurt you. Keep your money where you can reach it. The best income in the world is worthless the day you can’t get to it.