What an interest rate cut means for retirees

Bob Powell, Editor of Retirement Daily, joins TheStreet to explain the impact a rate cut will have on retirees.

Transcript

00:00So, you brought up this double-edged sword and inflation and interest rates, and so now

00:06that inflation is relatively under control and the Federal Reserve is going to be in

00:12a rate-cutting mode, what does that mean for retirees?

00:16Yeah, so I think for retirees, one thing that they might consider doing is to invest in

00:23a way that allows them to take advantage of the existing higher interest rates that may

00:27be around.

00:28So, you could invest maybe in a money market fund and earn 4%, which is above inflation.

00:33In fact, it's one percentage point above inflation at the moment.

00:36So that puts more money in your pocket.

00:38Anytime you can earn a nominal rate of return that's higher than the current inflation rate,

00:44you get a real rate of return that's positive.

00:47So think about investing in those instruments like money market funds, or consider laddering

00:51CDs at the moment.

00:52You might be able to ladder one, two, five-year CDs that offer higher rates than what inflation

00:59is at the moment, and then that can also put real money back in your pockets, too.

01:04And I think those two things would go a long way toward helping retirees invest in a way

01:08that ultimately, one of the goals of investing in retirement or throughout, even in your

01:14pre-retirement years, is to outpace inflation, and we now have an opportunity to do that.

01:22For more information, visit www.FEMA.gov