There may be better savings yields, but beware rising credit-card rates Retirees may benefit from this week’s expected interest-rate hike by earning more money on cash kept in CDs, high-yield savings accounts or money-market funds. Still, those gains may be offset by higher interest rates on credit cards and overall higher costs of living. Wall Street hopes to connect the Fed’s ‘dots.’ The Federal Reserve is expected to raise interest rates on Wednesday in the wake of the recent surge in oil prices, a strong jobs report and persistent inflation.
While some economists predict a series of rate hikes, any increase would be the first from the Fed since 2023, and the first under Kevin Warsh’s tenure as chairman. Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it. I would like to receive updates and special offers from Dow Jones and affiliates.
I can unsubscribe at any time. **Read:**30-year mortgage rate jumps to 7.17% — a nearly 2-year high — in the latest blow to the housing market With potentially higher interest rates “there are real positives here. Retirees who’ve built up cash reserves finally get paid something for holding safe assets. CDs, money markets and high-yield savings accounts all move up with the Fed, and for someone living off a fixed income, that extra yield on a CD ladder is real, spendable money,” Judge said.
Another benefit for older adults: Buying an annuity when rates are high can provide a larger regular payout, advisers said. While higher expected interest rates have some benefits for older adults holding cash, there are some instances when they can hurt seniors, especially those with debt. Nearly half of Americans aged 50 and older carry over credit-card debt from month to month, including debt on active cards or cancelled cards, according to AARP.
And seniors carry credit-card debt more often than people assume, sometimes to cover a medical bill or a grandkid’s tuition gap,” Judge said. Many traditional savings accounts continue to pay far less than online savings accounts, CDs or Treasurys. A CD or Treasury ladder can spread maturities over time, preserve regular access to money, and reduce the risk of locking everything up at one rate,” Lapp said.
Keep near-term spending money liquid, match bond maturities to expected expenses and avoid making bets about where rates will go next, Lapp said. Rising rates make HELOCs (home equity lines of credit) and adjustable-rate mortgages “unpredictable at exactly the point in life when predictability matters most,” Judge said. And don’t ignore a credit-card balance because ‘it’s just the minimum.’ The math on variable-rate debt moves against seniors faster than most people expect.” Judge said.
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