PIMCO’s Rob Arnott says a major demographic shift means bad news for U.S. markets in the coming decades, though he says smart baby boomers will still be able to hit their retirement goals within a year or two of their original plans.

Arnott tells The Wall Street Journal that this is the first year ever in the U.S. that the population of senior citizens will rise faster than the working-age population. Less than ten years ago, he says, 10 new workers were added to the population for every new senior citizen. “It goes to 10-to-1 in the opposite direction in 10 years,” Arnott says. “There will be 10 new senior citizens for each new working-age citizen. If that’s not a political, economic and capital-markets game changer, I don’t know what is.”

Arnott says that, combined with the debt and deficits facing the U.S., will combine to create “anemic” investment returns of about 5.5% to 6% for stocks. If bonds return 2% to 4%, he says, that makes for an overall average of about 4% returns per year for a portfolio — before taxes and inflation. “Net of inflation and net of taxes, that’s awfully close to zero real after-tax return,” he says.

Still, Arnott says he’s not talking about a “doom-and-gloom scenario”. Instead, he says, “What I’m painting is a scenario that is challenging, that’s difficult. Compared with the ’80s and ’90s, it is awful. But the ’80s and ’90s were an extraordinary period.”

Arnott also explains why he thinks emerging markets are a much more attractive area than the U.S. for investors, both in terms of bonds and stocks. And, he says, they may also be safer areas than the U.S. markets. “It’s really simple,” he says when asked to give his advice to baby boomers. “Save more aggressively; invest in economies that aren’t afflicted by the 3-D hurricane of deficit, debt and demography; and diversify into markets that can serve us well in a reflationary world.”