In theory, the "risk-free" rate is the rate of return on an investment that carries zero risk. U.S. Treasuries are considered lower-risk investments and are often used as a proxy when determining the "risk-free" rate in investing. The U.S. government has a long history of honoring its debt obligations.
However, there is no such thing as "risk-free" with investing since the U.S. government has a slight chance of default at any given time, depending on global and domestic events.
As of this writing, the 90-day Treasury Bill yields around 4.57 percent. A 12-month Treasury yields 4.80 percent, and the 10 Year Treasury yields approximately 3.53 percent —levels we have not seen since 2010.
As an aside, Treasuries are tax-exempt from Connecticut income tax.
When investing, it's always a good idea to consider low-risk treasury yields when determining whether or not it's worth the extra risk and volatility to invest in alternatives such as equities, private equity, or real estate. In this market environment, many of the leading financial firms are projecting that U.S. equity markets will have lower average returns over the coming decade than the previous decade due to inflation, demographics and global headwinds such as war and international debt levels.
If you agree with these assumptions and they hold up in the years ahead, then you owe it to yourself to consider your allocations.
The decade ahead may be shaping up to be more of a "stock pickers" market. For example, this year, seven well-known tech stocks have made up most of the returns for the S&P 500. Next year it may be 5-7 consumer staple companies or other dominant segments. In this scenario, you may want to ask your adviser about a core and satellite approach. For example, your advisor would allocate the core of your equities using an index approach and try to add value by incorporating a thematic sleeve or "satellite" of equities that make sense to own based on evolving economic conditions and longer-term trends.
The real key over the next decade will be your allocations based on your situation. How much you allocate to bonds, equities, alternatives, and cash will likely be crucial to your longer-term investment success.