To understand why, consider an individual with a master’s degree who begins a career at age 25 with a starting salary of $50,000. Assume his expected income increases by $2,500 each year until age 45, when his annual income reaches $100,000 and remains at that level until retirement at age 65. (This mirrors the average for similarly educated people in the U.S.) Let’s also assume that Social Security provides $28,000 a year in retirement, and there is no inflation. How much he will need to save during his earning years to reach his retirement goals depends on interest rates.

If interest rates are zero, accumulated savings earn nothing, and the individual’s total savings must equal $2 million by age 65 to fund retirement. Future Social Security benefits provide $700,000, which means he must save nearly 38% of pretax earnings each year to accumulate the additional $1.3 million. When interest rates are negative, say minus-1%, he must save 49% of every pretax dollar earned. Oh, and the average U.S. college undergraduate starts a career with nearly $40,000 of student-loan debt that must also be repaid out of income over the first 10 years of employment.

Under these conditions, building private savings to fund retirement becomes infeasible for most people and households. Extended periods of ultralow rates also make it more difficult for families to build precautionary reserves—for example, life insurance and long-term care insurance become prohibitively expensive.