PHONE: (717) 303-1999

Financial and Retirement Planning Blog

Near-Zero Rates From the Fed and What it Means For You

In a response to plunging numbers on the stock market, the Federal Reserve has stepped up to offer up some much needed relief in the form of a rate cut. With near-zero rates put in place, many are wondering how it will factor into their own financial futures.

Swings in stock market strength influence the ways people decide to invest and how they save for retirement. As the Dow Jones ticks lower, people’s 401(k) and investments will produce smaller returns for now.

Those who’ve planned to settle into retirement at least a decade from now, take this moment to have a look at how retirement accounts have reacted to the disruption in the markets. With a target-date fund, risk can be adjusted over a period of time to match your tolerance.

Personal investments require a more detailed review. A diversified portfolio is often more resilient in a time of volatility. A healthy assortment of bonds and stocks keeps a personal life savings sources of returns when a particular market fails.

This interest rate cut from the Federal Reserve influences how banks and lenders deal with borrowers. Loans will see lower interest rate, inviting more people to borrow, and, eventually, spend in large enough numbers to invigorate the economy.

Savings accounts, however, are adversely affected. The rate cut may change how much these accounts earn. While this change in rates may encourage some to move their cash out of banks, but it may be best to stay put. High-yield accounts will earn slightly less, but might be the best place to keep cash for the moment.

Credit card debt is a regular expense for millions in the US, and those will also see a drop in those interest rates. NerdWallet’s credit card and personal finance expert Kimberly Palmer, anyone with a credit card balance will welcome this rate cut. The debt owed, she points out, will be somewhat cheaper. ( Those paying off this debt can expect to see the rate cut reflect in a billing cycle or two.

Another cost expected to drop because of this decision are mortgages. Some may considered entering a refinance or purchase a home, and found interest rates provide an opportunity in the form of lower costs.

With lower rates, home owners and those looking to purchase one will be encouraged to be a little bolder in their decision to borrow the large sums they need. But considering the quick shifts in the market, some may be hesitant.

In the case of refinancing, borrowers will be liable for at least two and as much as four percent of the initial loan. The decision to refinance is more personal than just the current activity from the Federal Reserve.

These fluctuations that have hit the markets recently have been exceptionally volatile, and Palmer points out that the changes have been difficult to forecast. Her recommendation for those seeking a refinancing is to make sure of calculations and determine of what is saved will justify such a move. A rate reduction of at least three-quarters of a percentage point is what she says to look for before continuing with refinancing.


Investment Advisory Services offered through Retirement Wealth Advisors (RWA), a Registered Investment Advisor. Pennsylvania Wealth Management and RWA are not affiliated. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

This information is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Pennsylvania Wealth Management and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.

Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by Retirement Wealth Advisors.

Million Dollar Round Table (“MDRT”) is a membership organization. Qualifying criteria for membership includes attaining specified levels of commissions earned, premiums paid or income earned on the sale of insurance and other financial products. MDRT membership requirements include the payment of annual dues, compliance with ethical standards, and maintaining good standing with an MDRT-approved professional association. The MDRT logo and/or trademarks are property of their respective owners and no endorsement of Jason Bergey or Pennsylvania Wealth Management is stated or implied. MDRT and Retirement Wealth Advisors, Inc. (RWA) are not affiliated.