PHONE: (717) 303-1999

Financial and Retirement Planning Blog

Rising Interest Rates And Your Portfolio

The reality is that rising interest rates will likely continue through 2018.   This has been choreographed by the Fed Reserve for some time now, and even most of the talking heads on television agree that this is more likely to continue than not.  This begs the question of whether rising interest rates will harm your finances or benefit them. The answer is that they can affect your finances in both ways. A closer look at how interest rates affect you will help you to position your finances for optimal benefits.

The Impact on Your Debts

Interest rates directly impact the cost of your debts. If you have a fixed rate debt, such as is common with a home or a car loan, rising interest rates will not affect these debts until you refinance your home or buy a new car. You also may have adjustable rate debt, such as is common with credit cards and some loans. The rates on these debts will rise as the market rates rise, and this means that your monthly debt payments will increase. If you carry substantial debt with an adjustable rate, you can generally expect your budget to feel burdened. Furthermore, high interest rates can be costlier when you apply for new financing in the future.

The Impact on Your Assets

On the other hand, rising interest rates can be beneficial for you if you have specific types of assets. For example, savings accounts and money market accounts are directly tied to interest rates, and you will benefit from a higher yield on these accounts. CD rates and bond rates generally will improve substantially as well, and this means that you can enjoy a higher yield on relatively safe investments. Stocks and mutual funds may be hit for a short period of time until corporations adjust their finances. Understanding how your assets are tied to interest rates is important if you want to take full advantage of rising rates while minimizing your financial risk.

How to Position Yourself to Benefit From Rising Interest Rates

As you can see, in the most basic sense, rising interest rates benefit your assets and are detrimental to your debts. Make an effort to pay down debt balances. Take out new debt strategically. For example, now may be the time to purchase a home so that you can lock in a low interest rate with a 30-year fixed term. Eliminate adjustable rate debt, if possible. In addition, prepare to take advantage of rising interest rates with strategic CD and bond purchases. You may even invest in rental real estate now. You can lock in a low fixed rate mortgage on your rental property, and you can enjoy the income stream with affordable financing for decades.

Interest rates are a critical component to personal finances. By understanding how interest rates impact your financial well-being and by paying attention to expert insight regarding changes to interest rates, you can better position yourself to improve your financial situation in the years to come.

Play It Safe
As you near retirement your planning should zero in on safer investments in general. The shorter your time horizon until retirement, the less you may want to have riding on things like stocks.

Stocks can be great for building long-term wealth, but they are also risky by nature. They are higher risk and higher reward.  It is when you near the time that you are ready to leave work that you will want to shift into investments that have less risk to them but can still afford you some return on your money. Moving into more guaranteed income vehicles, cash and interest baring accounts could be a better strategy. You may want to avoid risky investments that could leave your nest egg with a lot less money than you had expected to retire with.

Speak With Your Adviser
Understand that a professional financial adviser can help you create a plan that will last through your retirement and achieve your retirement planning goals.  He or she has the ability to really make an impact on your Golden Years.  We are here to help answer your questions as the market and our nations economy changes.

Jason Bergey
Pennsylvania Wealth Management
https://pawealthmanagement.com/
(717) 303-1999
Sources: Hyperlinked In Article

Copyright © 2018 Pennsylvania Wealth Management

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.

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.