Written By: Ryan Rinehart

On Wednesday, the Federal Reserve (the Fed) decided to hold interest rates steady at about 5.3%, a level we have not seen in two decades. This decision comes amid ongoing concerns that inflation remains significantly higher than the Fed’s target of 2% despite previous hopes that it was on a downward trajectory. On top of inflation being higher than they had hoped, we’ve also seen global economic factors such as supply disruptions and geopolitical tension that have made it difficult for the Fed to confidently reduce rates.

This isn’t necessarily bad news for you though! For those of you that are close to retirement or in retirement, you should be taking advantage of these higher rates within your investment portfolio.

Here’s a few different ways you can do that:

Take Advantage of High Yields on Money Market Accounts:

If you have cash at the bank not earning interest you’re missing out! For our clients who need their money to be fully liquid but also want to take advantage of high yields, the Fidelity Government Cash Reserves Money Market Fund (FDRXX) is a fantastic option. If you have a significant amount of cash that you may need in the next 1-2 years for expenses, this is a great option to get some growth on it without any risk or liquidity restrictions.

Utilizing MYGAs or CDs:

Multi-Year Guaranteed Annuities (MGYAs) are very similar to CDs in the sense that they are safe and guarantee a percentage of interest over a multi-year period. The main difference between CDs and MYGAs is that CDs are issued through a bank or credit union whereas MYGAs are issued by insurance companies. One benefit to MYGAs is that the income tax on interest earned is deferred until the year you take a distribution. Rather than each year for a CD. This can help you plan for taxes more efficiently and structure it so that you take the MYGA distribution during a year where your taxes are lower. Either way, MYGAs and CDs are great options for your safe money currently. Depending on where you look, MYGAs might have slightly higher rates. Either way the key is making sure your cash is taking advantage of these higher rates.

Utilizing Fixed Indexed Annuities:

Many of you have Fixed Indexed Annuities (FIA) in your investment strategy. With the higher rates we’ve seen a major improvement in the rates being offered with these products. A quick refresher on FIAs and why we utilize them in your portfolios:

• Safety of Principal: Your money is downside protected. This is why we use it as the “Foundation” in your financial house. 
• Potential for Growth: Instead of a fixed interest rate, the returns on a fixed indexed annuity are tied to the performance of a specific market index like the S&P 500. If the index does well, you earn more interest; if the index goes down, your principle does not. The returns usually have a Cap (maximum gain) and a Floor (minimum gain, often 0%). This means that even if the index sees a significant rise, your gains are capped at a predetermined maximum rate, but you also won’t lose money if the index drops, as your floor is often 0%.

The reason FIAs have become even more attractive as a safe option in your portfolio is that the Caps I mentioned above are currently much higher than they have been in the past. This again is due to the higher rates we are seeing everywhere at the moment. Many of you have taken advantage of the higher interest rates and saw great results last year with your FIAs.

I always like to look at things through the positive lens and while interest rates staying high means inflation is still hot, it’s not the worst news for those of you that are conservative and like safe/downside protected investment options. So, make sure you’re taking advantage because it won’t be like this forever!

If you have questions, we are here to help. We can:

Reassess Your Investment Portfolio: With the shift in economic winds, reviewing your investment strategies is prudent. Diversification and reallocation might be necessary depending on your stage in life.

Review Your Spending Plan: With inflation still higher than we’d like, it has certainly caused expenses to rise for many of you in retirement. It’s important we continue to review this in your strategy meetings to make sure your plan is still in good shape.

Review Your Income Plan: We can review your income needs for the next 6-12 months and determine if now is a smart time to shift some of your investments to a safer spot to avoid any volatility prior to taking money out of your investments.

Say What?

Company Makes Millions Off Discarded Coins

The article highlights:

A sustainable waste processing company called Reworld has collected at least $10 million in coins over the last seven years after noticing more coins were ending up in the trash as Americans switch to electronic transactions. The US Mint estimates that Americans toss $68 million worth of change every year. The Mint spent over $715 million making coins last year, but more than half of those coins just sit in people’s homes.  

This week in history

1877 – Rutherford B. Hayes has the first phone installed in the White House.

1940 – Winston Churchill becomes prime minister of Britain. 

1964 – Louis Armstrong hit No. 1 on the US singles chart with “Hello Dolly,” making him the oldest artist to hit No. 1 at the age of 62. (That record was broken in 2011 when Tony Bennett topped the charts with his Duets album at age 85.) Armstrong’s hit also ended the Beatles’ reign at the top of the U.S. pop charts. 

1965 – Warren Buffet gains a controlling interest in Berkshire-Hathaway. The shares were trading at less than $20.00 per share at the time. 

2010 – At age 88, Betty White became the oldest person ever to host Saturday Night Live after hundreds of thousands of fans signed a Facebook campaign rallying in support. She died December 31, 2021 just shy of her 100^th birthday.

What did it cost? (12oz Can of Tomato Soup)

1974 – 10 cents

2004 – 50 cents 

2024 – $1.23

Have any questions? That’s what we’re here for! Call us at 844-227-5766 today!