Federal Rate Hike
September 1, 2022
This month we are focusing on navigating unexpected life changes in retirement.
You have likely heard that the Federal Reserve recently announced a .25% increase in interest rates.1 While many people saw this coming, it still brings a lot of questions, especially for those nearing retirement. Let’s dive in and answer some of the questions surrounding this news.
What is a rate hike?
“To control the money supply, the Fed establishes a target for the federal funds rate. This is the interest rate that banks charge each other for short-term loans. The higher this rate is, the more expensive it is for a bank to borrow money. When the Fed announces a rate hike, they are saying they have increased their federal funds rate target.”1
How often does this happen?
This was the first rate increase since 2018. The Federal Reserve has indicated that more hikes could be expected in the near future.1
What does this mean for your retirement?
- Rising rates typically put downward pressure on stock prices, causing returns to drop.1
- The rates on newly issued CDs will be higher.1
- You will get a slight boost on the money you earn on your savings and money market accounts.1
- Just like with CDs, the interest rate on newly issued bonds will be higher.1
- If you have a fixed annuity, your payout will also be impacted by current interest rates.1
It can be overwhelming when changes occur close to retirement, especially when they are out of your control. The good news is something such as increased rates don’t have to derail your retirement plan. When you have a financial professional on your side and a tailored retirement strategy, you can feel prepared for whatever the future holds.
Do you want to learn more about how higher interest rates could impact you personally? Contact us to schedule your complimentary consultation today!
1. https://www.moneyrates.com/investment/rate-hikes-retirement-money.htm