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We all knew the days of zero-percent interest couldn’t last forever. Now that the anticipated Federal interest rate hike has come, it’s time to think about what that change from .25% to .50% could mean for investments and retirement planning.
While some of your stocks may still be booming on, others, like those rooted in Europe and commodity prices, could be more risky now. Consider reducing your investment there or reallocating altogether. You might also consider growing your portfolio, since the 30-year bull market on bonds seems to be at its end. Pros like Jerry Micolis, founder of Giralda Investments in New Jersey, predict that the traditional 60/40 portfolio could look more like 80/20 in coming years.
Protect the Downside
Downside protection is the term for strategies used to protect investors against major losses. Should the value of the security underlying your stock decline, these tactics can somewhat lessen the fiscal blow. Diversification of investments is a common way of protecting your overall nest egg from being cracked by one bad investment. You can also write a covered call on stocks you know are rising, and agree to sell them at a specific price on a specific date. This may mean “missing out” on the peak high, but in the long run, you have more money than you started with and can invest in the next big thing.
Fix or Eliminate Debt
For most retirees, their biggest debt is their mortgage. Some lenders offer the option to fix the loan’s interest rate at current rates at any time. If this option is available to you and it makes sense to take it, do so. Also consider refinancing your home if possible and necessary; the window on that option being viable is closing as funds become less available.
Lastly, it always makes sense in retirement planning to try to reduce your monthly debt costs. If you’re lacking the funds to make a serious dent, consider a life settlement. You’ll reap the benefits of your investment in life insurance and have an easier road to walk into retirement. Visit our calculator to see if you qualify!
Download our free resource, Serving Senior Clients, for more information about how you can unlock a powerful new source of financial liquidity for your clients today.