Low interest rates are actually a good thing for many people and businesses. Anyone selling their home or looking to buy their first home can reap benefits from low interest rates. But according to Karen Paul of Times Argus in Vermont, “There’s a painful downside to low interest rates” as well.
Those who may be hit hardest by low interest rates are retirees using their investment returns to pay their living expenses. Those who have money in CDs whose rates have dropped during their term will have a hard time adjusting to what can be much less in returns. A lot of people are finding their CD and Treasury returns have gone from 4-5% all the way down to 1-2%. With those interest rate drops and inflation combined, some retirees have dire concern over what they will do to maintain their lifestyle and pay their bills.
Those who have diversified their investments have less to worry about than those who haven’t, but low interest rates will affect everyone across the board. The article recommends three ways to combat lower interest rates. Now is a great time to look into annuity products. Fixed annuity rates can still offer you a good rate of return and variable annuities even offer you the potential for growth when interest rates come back up. Annuities offer security and predictability when retirees are worried about meeting their monthly expenses.
The article offers two other ways to use a portion of your money and diversify to get more interest. High-yield bonds, like corporate bonds and mortgage-backed bonds that pay better yields, and stocks which pay dividends are also good options right now. Definitely speak to your financial advisor or find a reputable one before making any of these long term purchases. Any good financial advisor will want you to be secure in your retirement and will help you determine if these products are right for you in this low interest rate environment.
Written by Rachel Summit
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