Unlike higher gas prices, which hurt almost everyone, higher borrowing costs have an uneven impact In September 2024, Donald Trump, then the Republican nominee for president, promised: “We’re going to put a temporary cap on credit-card interest rates … at around 10%.” Yet today, the Bankrate Monitor National Index shows the average credit-card APR at a historically elevated 19.6%. Mortgage rates are also at levels not seen since the turn of the century. Those numbers are only likely to rise, as these and other interest rates often increase within a few months of hikes in the federal-funds rate — like the one that just happened last month.
People with credit-card debt suffer. But a higher federal-funds rate also leads to higher returns on assets that retirees often hold. Given high government debt, the funding needs for the AI build-out and inflation fueled by the Iran war, interest rates are likely to remain high.
It’s worth a look at the various ways — good, bad and ugly — that high rates affect those near and in retirement. What's next for SpaceX as more shares enter the market and capex jumps Play video: What's next for SpaceX as more shares enter the market and capex jumps **Opinion:**Falling wages, soaring energy prices and inflation: It’s beginning to look a lot like the 1970s 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. Higher interest rates have a few clear benefits for those near and in retirement. For near-retirees who are considering annuitizing some of their wealth, higher rates are helpful.
For example, the monthly payout for a $100,000 annuity bottomed out around $425 for a 65-year-old female when interest rates fell during the COVID-19 pandemic, and have rebounded to nearly $600 a month as rates have risen. Certainly, this impact could be good news for the admittedly small (but perhaps growing) number of people who use annuities. A more common positive impact is for those who hold cash-like assets with interest rates that respond to the federal-funds rate: mainly, savings accounts, money-market accounts and short-term certificates of deposit.
Roughly 3 in 5 Americans ages 55 and over hold at least some wealth in these assets, according to an analysis of the Survey of Consumer Finances. Still, those assets are usually a small part of older Americans’ net worth — 3% to 4%, on average. So while rising interest rates can help here, it may not be a huge boon. **Opinion:**Here’s a sneaky way to play the Fed’s rate increase When people think of high interest rates, mortgage rates usually spring to mind.
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