Interest Rates are Staying High: How to Make them Work in Your Favor

I recently had the opportunity to speak with Erin Kennedy about how retirees and pre-retirees can respond to the current high interest rate environment. With rates expected to remain elevated for some time, there are important money moves folks should consider.

In our conversation, Kyle explained that now is an excellent time to take stock of your personal balance sheet – assessing both assets and liabilities. One area many retirees should address is credit card debt, which can carry interest rates of 25% or more. For example, $25,000 of credit card debt at 25% interest equates to $520 per month in interest payments alone – a heavy burden for those on a fixed income.

On the savings side, Kyle suggests targeting money market and CD rates in the 4-5% range. While we’ve gotten accustomed to 0% rates in recent years, the landscape has shifted. Retirees should ensure their “lazy money” is now working harder for them.

Kyle also highlighted fixed indexed annuities as an attractive option, given their interest rate sensitivity. He often uses these vehicles to generate lifetime income streams for clients, creating what he calls a “personal pension.” Now is an opportune time for retirees to consider annuities as part of their retirement planning.

In terms of big purchases, Kyle advised carefully weighing whether financing constitutes “good debt” or “bad debt.” While mortgages are reasonably priced historically, credit card debt can quickly spiral. Retirees should think twice before taking on loans for depreciating assets like RVs.

For those interested in discussing annuities or guaranteed income strategies, Kyle encouraged reaching out to him via the First Coast Financial Group website.

With heightened economic uncertainty ahead, having a professional perspective is key. This conversation shone light on the moves retirees can make to shore up their finances.