As interest rates rise, it’s always important to keep in mind the purchasing power of your money. For people at or nearing retirement, the amount of goods and services that can be purchased with a dollar of savings is an especially important consideration. If retirement is in your near future, there are some key points you should be aware of if you are thinking of investing in bonds.
HOW DO INTEREST RATES AFFECT RETIREMENT?
It’s important not to act too dramatically when interest rates change. By staying calm and patient and focusing on long-term goals you can keep your retirement plans on the right track. Higher interest rates can have a negative affect earnings and stock prices, so it’s worth looking into solutions to protect your savings. With the recent spike in inflation, a renewed interest in I bonds may have caught your attention. Like every investment vehicle, there are some key points to take into consideration.
WHAT ARE I BONDS AND ARE THEY RIGHT FOR YOU? Pros:
- I bonds are issued by the US Treasury, and designed to protect the purchasing power of your funds from declining due to inflation
- They earn an interest rate that is fixed for the life of the bond + an inflation rate that is adjusted each May and November, based on changes in the consumer price index.
- Investors can buy up to $10,000 in I bonds annually and can purchase another $5,000 per year with their tax return. Maximum annual I bond purchase amount is $15,000 per person.
WHAT ARE I BONDS AND ARE THEY RIGHT FOR YOU? Cons:
- Must hold an I bond for, at least, 1 year before it can be cashed in
- They can’t be bought or sold in secondary markets, only directly from the U.S. Treasury
- Must hold the I bond for, at least, 5 years to receive all the interest that’s due
- If you cash in your I bond between the second and fifth year after purchase, the past 3 months of interest are forfeited
- There isn’t a guaranteed return with an I bond – if interest rates fall, the yield on your I bond falls too
HOW DOES CHANGING INTEREST RATES AFFECT RETIREMENT?
As with all retirement plans, the answer to how it affects your retirement is personal. Retirement shouldn’t be based on one standard model, rather it should be tailored to your target retirement date and personal goals. Talking with someone with experience and knowledge of market changes can help you devise a plan that is right for you. Benchmark Financial Group can help you devise that plan. All it takes is an initial consultation to get started. There is no cost for the initial meetings, and it can help you get clear on your goals and how you want to move forward in retirement.
READY FOR THE NEXT STEP? WE CAN HELP!
If you have any questions regarding your federal retirement, Benchmark Financial Group is here to help. We will take a closer look at your financial situation because retirement may be closer than you think! Schedule an appointment today with Benchmark Financial Group by filling out the form online or calling David Raetz at 913-534-8256 to discuss your financial needs. Benchmark Financial Group is happy to help you navigate your options and determine the best path to move toward your financial goals.
*Securities and Advisory Services Offered Through Client One Securities, LLC Member FINRA/SIPC and an Investment Advisor. Benchmark Financial Group, LLC and Client One Securities, LLC are not affiliated.
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Overland Park, KS 66210