The Federal Reserve is widely expected to slash interest rates in a move that could have ripple effects across the entire economy. Bob Powell, Editor, Retirement Daily, joined TheStreet to discuss what lower interest rates could mean for retirees.
Transcript:
CONWAY GITTENS: And so now that inflation is relatively under control and the federal reserve is going to be in a rate cutting mode, what does that mean for retirees?
BOB POWELL: Yeah, so I think for retirees, one thing that they might consider doing is to invest in a way that allows them to take advantage of the existing higher interest rates that may be around. So you could invest maybe in a money market fund and earn 4% which is above inflation. In fact, it’s it’s one percentage point above inflation at the moment. So that that puts more money in your pocket any time you can earn a nominal rate of return that’s higher than the current inflation rate, you get a real rate of return that’s positive.
So think about investing in those instruments like money market funds or consider laddering CDs. At the moment, you might be able to ladder 1 to 5 year CDs that offer higher rates than what inflation is at the moment, and then that can also put real money back in your pockets, too. And I think those two those two things would go a long way toward helping retirees invest in a way that ultimately one of the goals of of investing in retirement or throughout even in your pre-retirement years, is to outpace inflation. And we now have an opportunity to do that.
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