Need cash but worried about stocks? Consider munis.
Say goodbye to a decade of rock-bottom interest rates — and if you’re a retiree or soon-to-be retiree looking for investment income, that’s good news.
But higher rates can also be a double-edged sword. If you have debt, if you have an adjustable-rate mortgage that’s about to reset, higher rates could sock you right in the wallet.
Here’s the background: the Federal Reserve has raised what’s known as the “Federal Funds” rate for the second time this year, and signaled that more hikes are coming in the second half of 2018. Banks and credit unions typically tie those rates to rates they offer you on things like savings accounts and certificates of deposit (CDs) — so a hike by the Fed typically means good news for savers.
“This has been a long time coming,” says Rob Williams, Denver-based director of income planning for Charles Schwab SCHW, +0.90% . “Finally we’re seeing the (Fed’s) short-term interest rate rise, which has been very helpful in increasing the return on cash and short-term investments. It’s a great thing for retirees to be finally getting some return on their lower risk investments.”