Abstract
Real rates declined by more than 4% points between 1980 and 2023 driving large capital gains on long-lived assets. Households that rely on their financial wealth to finance future consumption need more wealth to fund the same consumption plan after rates have declined. To be hedged against interest rate risk, households need to match the duration of their portfolio to the duration of a claim on their future consumption in excess of labor income. We find that young and poor US households were worse off when rates declined, because they had too little duration in their portfolios. Older and wealthy US households were better off. We characterize the compensated financial wealth distribution implied by full hedging and compare it to the actual one.