The Federal Reserve has cut interest rates by 50 bps, marking the first rate cut since 2020. Bob Powell, Editor, Retirement Daily, joined TheStreet to discuss what lower interest rates could mean for retirees.
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Full Video Transcript Below:
CONWAY GITTENS: And so now that inflation is relatively under control and the federal reserve is going to be in a rate cutting mode, what does that mean for retirees?
BOB POWELL: Yeah, so I think for retirees, one thing that they might consider doing is to invest in a way that allows them to take advantage of the existing higher interest rates that may be around. So you could invest maybe in a money market fund and earn 4% which is above inflation. In fact, it's it's one percentage point above inflation at the moment. So that that puts more money in your pocket any time you can earn a nominal rate of return that's higher than the current inflation rate, you get a real rate of return that's positive.
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So think about investing in those instruments like money market funds or consider laddering CDs. At the moment, you might be able to ladder 1 to 5 year CDs that offer higher rates than what inflation is at the moment, and then that can also put real money back in your pockets, too. And I think those two those two things would go a long way toward helping retirees invest in a way that ultimately one of the goals of of investing in retirement or throughout even in your pre-retirement years, is to outpace inflation. And we now have an opportunity to do that.
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