After nearly a decade of low interest rates, the Federal Reserve is taking action. The Federal Open Market Committee has raised the federal funds rate three times this year, with the most recent increase taking the rate to 2.25 percent.1 The Fed started raising rates in December 2015 and has accelerated increases this year as the economy appears to have fully emerged from the 2009 financial crisis.
 
According to Fed Chairman Jerome Powell, current rates aren’t close to neutral, which is the rate considered appropriate for current economic conditions. That means more rate hikes could be coming soon. The Fed’s own outlook indicated the neutral rate could be anywhere from 3 percent to 3.4 percent.2
 
The federal funds rate is an important leading indicator of overall interest rates. Banks and other financial institutions use the federal funds rate for overnight lending to other institutions. That means it’s used as a basis for rates on a wide range of financial vehicles, including savings accounts, certificates of deposit, credit cards and more.
 
If you’re nearing retirement or already retired, you may be wondering what these rate hikes will mean for your financial future. What does it mean for your strategy? How will the rate increases impact the financial markets?
 
There are no easy answers to these questions, as it’s difficult to predict the financial future. However, past periods of interest rate increases can offer a glimpse into what may happen. This could be a good time to analyze your strategy and review it with your financial professional.

Savings rates may go up.
 
If you’re a saver, you’ve probably been frustrated with interest rate levels for some time. Rates on savings accounts, certificates of deposit and similar vehicles have been at or near zero for years. However, a higher federal funds rate could lead to higher deposit rates at your local bank.
 
You may not see the rate increase overnight, but it will likely happen eventually. Shop around for rates, and take advantage of institutions competing with one another for new deposits. Also, consider an annuity with a fixed interest rate. These vehicles combine predictable, competitive interest rates with tax-deferred growth, so they could play an important role in your strategy.
But debt rates could too.
 
Debt is always problematic in retirement, but it could become especially challenging if it has an adjustable interest rate. You may see those rates and the related debt payments increase in coming months. If possible, think about ways to pay down those debt balances or even consolidate them into something with a fixed rate.
 
Also, consider your schedule or timeline if you’re looking to purchase a new home or refinance your mortgage. Mortgage rate increases are often gradual, but they do happen, especially if other rates are increasing. An increased rate on your mortgage could lead to higher payments or reduced purchasing power.

The investment markets could fluctuate, but that isn’t necessarily a bad thing.
 
Interest rate increases could affect the financial markets, but it’s difficult to predict exactly what the impact may be. Bond yields may increase, and bond prices could drop. Some investors may move from the stock market to the bond market to take advantage of new opportunities.

However, the financial markets are influenced by a wide range of factors. It’s nearly impossible to predict market performance, especially in the short term. Your strategy should be based on your unique needs and goals, not on short-term changes to the overall economy. While it may be time to make gradual changes to your strategy, resist the urge to make a drastic, emotional change. Your financial professional can help you examine your strategy and determine if a change is needed.
 
Ready to review your investment strategy? Let’s talk about it. Contact us today at Financial Solutions Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
 
1https://www.bankrate.com/banking/federal-reserve/fomc-recap/
2https://www.cnbc.com/2018/10/03/powell-says-were-a-long-way-from-neutral-on-interest-rates.html
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18155 - 2018/10/17

​What’s your biggest financial risk? Job loss? An economic downturn? Perhaps a medical emergency or costly repair to your home? You’ve probably taken steps to prepare yourself for all these possibilities and to minimize your exposure.

However, there’s one type of risk you may not be protected against. It’s disability. According to the Council for Disability Awareness, more than 25 percent of all working adults will experience disability at some point in their lives. That could be problematic, as more than 51 million Americans don’t have any disability coverage and more than half wouldn’t be able to support themselves for three months.1
 
Not all disability is the same. Disabilities generally fall into one of two categories: short-term or long-term. Both types are more common than you would think, and the protection strategies for each type are unique and distinct. It’s helpful to understand the different threats so you can develop a protection strategy.
 
Below are common questions and answers about short- and long-term disability. A financial professional can also help you analyze your risk exposure and implement a coverage plan.
​
What is short-term disability?
 
Short-term disability is generally described as an injury or illness that prevents you from working for several weeks or months. Many short-term disability insurance policies will provide benefits for up to six months. If the disability extends beyond that time frame, it’s usually considered long-term.
 
Short-term disabilities are often caused by accidents, but they can also be caused by a serious illness like heart disease. For women, pregnancy and childbirth can lead to a short-term disability if their employer doesn’t offer paid maternity leave.
 
If you’re injured at work, you may be able to qualify for workers’ compensation. However, keep in mind that workers’ compensation claims aren’t automatically approved. Also, don’t count on Social Security to cover a short-term claim. Social Security disability benefits are notoriously difficult to obtain, and they’re usually reserved for serious long-term disability claims.
 
Many employers offer group short-term disability coverage as a standard part of their benefit package. However, not all do. If yours doesn’t, you may want to look into an individual policy that replaces a portion of your income if you’re physically unable to work. These policies are generally affordable relative to the level of protection they provide.

What is long-term disability?
 
A long-term disability is one that extends beyond six months. Often, long-term disabilities last for years, if not for life. They can be caused be a wide range of issues including cancer, heart disease, back or joint issues, cognitive disorders and much more.
 
Social Security offers disability benefits for those who suffer serious long-term injuries or illnesses. However, it can be difficult to qualify for benefits. Even if you do qualify, it’s unlikely the benefit would cover your full expenses. The average monthly benefit is just under $1,200 per month.2
 
The most effective form of protection against long-term disability is an insurance policy that replaces a significant amount of your income. While this coverage is sometimes available through an employer’s benefit program, you may be better served by an individual policy. You can adjust the policy to align with your needs and budget. A financial professional can help you find the right policy for you.
 
Ready to develop your strategy? Let’s talk about it. Contact us today at Financial Solutions Group. We can help you analyze your risk exposure and create a plan. Let’s connect soon and start the conversation.
 
1http://disabilitycanhappen.org/disability-statistic/
2https://www.disabilitysecrets.com/how-much-in-ssd.html
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18185 - 2018/10/22