This week, I’m talking about how the interest rate decisions by the Fed to raise or lower interest rates impact your retirement portfolio.

Yesterday, I gave you a primer on the teeter-totter relationship between interest rates and bond prices, which is important to understand for this week’s topic. 

Today, I’m getting into the meat of why this is relevant for you by talking about what happens to your portfolio when the Fed cuts interest rates. 

As I’ve mentioned earlier this week, Fed Interest Rate Decisions have far-reaching impact on the economy and markets, but there are 2 areas in particular i want to focus on today - how your stock and bond portfolios are impacted when the Fed cuts interest rates. 

In July, the Fed cut interest rates for the first time in over a decade, after steadily raising rates for the last 5 years. I want to focus on rate cuts today, since that’s the path that the Fed appears to be on for the foreseeable future.

First, let’s look at bonds. When the Fed cuts interest rates, the rate that you’ll get on your bonds (i.e. the yield) drops. So for example, if rates dropped from 5% to 2%, you would likely see that the yield on your bond portfolio would also drop, and if you’re reinvesting and buying new bonds, you are probably forced to settle for lower income as well. This has really hurt retirees over the last 10 years, since they need income from their bonds and the income has been much much lower than historical norms. 

On the flipside, when interest rates drop, bond prices go up, so even if the income or yield is lower, the value of your bond portfolio will often remain stable or even grow, which is nice!

But in general, cuts in interest rates, especially over longer periods of time, tend to be harmful for your bond portfolio, because it may not be able to generate the kind of income that you need it to in retirement, since the interest rates on the bonds you own are lower. 

Fed decisions on interest rates don’t just impact your bond portfolio. They also impact your stock portfolio as well - in a big way! The big drop in the stock market last December and the big gains in the stock market so far in 2019 have largely been the result of the Fed’s intentions and actions to lower interest rates. 

This isn’t always the case, but in general, interest rate cuts tend to be good for stocks, mainly because rate cuts help inject a little more juice into the economy. Lower rates equal lower borrowing costs for consumers and businesses, which helps grease the wheels of the economy. The stock market usually reacts positively to this extra grease, and the reaction is usually immediate. 

So while lower rates might not be great news for your bond portfolio, it’s generally great news for the stock market, and can be a catalyst for growth in your overall portfolio. 

That’s it for today!  Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, interest rates today, interest rate policy, federal reserve, fed policy, rate hikes, rate cuts, monetary policy, monetary policy definition, monetary policy tools, interest rate cut, fed interest rate, how to interest rates affect the economy, why does the fed raise interest rates, why does the fed lower interest rates, what happens when interest rates are cut, bonds, fixed income, bond interest rate

This week, I’m talking about how the interest rate decisions by the Fed to raise or lower interest rates impact your retirement portfolio. Before we get into that though, we need to spend today on a very important primer, so you can understand what the heck those talking heads are yelling about, and why it matters when you hear on the news that the Fed cut rates again at this month’s meeting. 

Today, we’re talking about the relationship between interest rates and bond prices. The Federal Open Market Committee - you’ll often hear this committee referred to as the FOMC or the Fed - they meet eight times a year to determine the federal funds target rate. The Fed’s decision to raise, lower, or leave rates unchanged have a direct impact on everything from mortgage rates, to interest you’re earning on your bond portfolio, to your stock portfolio. 

The current federal funds rate is currently just above 2%. That’s very low by historical norms. Over the last 60 years this rate has been closer to 4-6%. And it’s even jumped to as high 20% in 1981, as many of you baby boomers remember. My parents bought their first house that year and paid a 12% interest rate on their mortgage. Can you imagine? 12%! Insane.

Here’s what you need to know about interest rates, other than they ebb and flow and are about as predictable as whether or not the groundhog will see his shadow next year: Interest rates and bond prices have a teeter-totter relationship. 

If you can keep that image of a teeter totter in mind, it will help you remember one of the most important lessons about interest rates and bond prices: When interest rates go up, bond prices go down. When interest rates go down, bond prices go up. 

During the Great Recession, the Fed cut rates to zero. When that happens, bond prices went up, which no doubt helped prop up the value of your bond portfolio, but the downside is that when you looked at the rates you could get on your savings accounts and rates on buying new bonds, it was pretty depressing. Then in 2015, the Fed started raising interest rates again, and have continued to gradually raise rates until this summer when they cut rates in July for the first time in over a decade. 

So as rates have gone up over the last 4 years, you can earn more interest (or yield on your bonds and your savings accounts), but the overall return in bonds over the last few years hasn't been great because the increase in interest rates have caused bond prices to drop - again because of that teeter totter inverse relationship between interest rates and bond prices. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, interest rates today, interest rate policy, federal reserve, fed policy, rate hikes, rate cuts, monetary policy, monetary policy definition, monetary policy tools, interest rate cut, fed interest rate, how to interest rates affect the economy, why does the fed raise interest rates, why does the fed lower interest rates, what happens when interest rates are cut, bonds, fixed income, bond interest rate

Welcome to a new week and a new theme here on the One Minute Retirement Tip! This week, I’m talking about how the interest rate decisions by the Fed to raise or lower interest rates impact your retirement portfolio. Interest rates today are low compared to historical norms and that has an impact on your retirement portfolio. 

I don’t think I can overestimate the impact that Fed decisions about interest rate policy have on your portfolio. Decisions from the Fed to raise or lower rates are massive drivers behind what happens in both the bond markets and stock markets. 

While no one can reliably predict what the Fed will do next, it is important that you understand how the current interest rate environment impacts you. 

So this week, I’m sharing with you the relationship between interest rates and bond prices, what happens to your portfolio when interest rates are cut, 2 big mistakes that investors make when rates are low...and how you can avoid them, and lastly, how you can boost your income in retirement when you’re lucky to get 2-3% returns in your bond portfolio. 

That’s it for today. Thanks for listening! Tomorrow, we’re going to dive in with the foundation of our discussion on interest rates - The Relationship Between Interest Rates and Bond Prices.

Before you go, please take a minute to leave a review for the One Minute Retirement Tip in Amazon or iTunes. If you find these tips valuable, or if you have feedback for me or topic suggestions, it’s a great way to share the love and share your ideas with me! And thanks to you if you who have already left a review. 

My name is Ashley Micciche...and this is the One Minute Retirement Tip. 

----------

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, interest rates today, interest rate policy, federal reserve, fed policy, rate hikes, rate cuts, monetary policy, monetary policy definition, monetary policy tools, interest rate cut, fed interest rate, how to interest rates affect the economy, why does the fed raise interest rates, why does the fed lower interest rates, what happens when interest rates are cut, bonds, fixed income, bond interest rate

It’s Sunday, which means...It’s recap time! 

The theme for this week was: 5 questions to ask before you rollover your old 401k. When you change jobs or retire, you’ll want to decide what to do with that old 401k plan from your previous employer. You really have 3 good options - leave it there, roll it over to your new plan if you’ve changed jobs and your new employer offers a 401k, or you can roll it over to an IRA. But how do you know which option is right for you? 

So this week, we talked about 5 questions that you’ll want to ask before you do anything with that old 401k. 

Hopefully after listening to the tips this week, you better understand how important it is to really put some thought into how you want to handle that old 401k, so you can make an informed decision. 

Here are the 5 questions we covered this week: 

• How Will The Fees Change?
• Will the Investment Options Be Better?
• Do I Need Protections that the 401k Can Provide?
• Will You Continue To Work For Your Previous Employer?
• Does Consolidation Make Sense For Other Reasons?

If you missed any of these episodes, you can find them on iTunes or Google Play by searching for the “One Minute Retirement Tip with Ashley”. 

Tomorrow, come on back, because we’re starting a brand new theme: What fed policy means for your retirement. The Fed has recently started lowering rates again, which the stock market seems to love, but how will changes to interest rates impact your bond portfolio and your stock portfolio in retirement. It’s an interesting topic that will hopefully allow you to pontificate on the ramifications of lower interest rates at your next cocktail party. 

That’s it for this week! Thanks for listening. 

My name is Ashley Micciche and this is the “One Minute Retirement Tip”.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, required minimum distribution, RMD, rmd penalty, ira vs 401k withdrawal rules, rmd aggregation rules, rmd exceptions, IRA rollover rules, IRA transfer, IRA rollover, 401k rollover, what is a rollover, 401k rollover to IRA, 401k rollover rules, 401k rollover to IRA rules, 401k rollover to new employer, 401k option, 401k investment options, 401k plan fees, 401k fees

When you change jobs or retire, you’ll want to decide what to do with that old 401k plan from your previous employer. You really have 3 good options - leave it there, roll it over to your new plan if you’ve changed jobs and your new employer offers a 401k, or you can roll it over to an IRA. But how do you know which option is right for you? 

So this week, I’m teeing up for you 5 questions that you’ll want to ask before you do anything with that old 401k. 

Today’s question that you’ll want to ask before touching that old 401k is: Should I consolidate my old 401ks into an IRA for other reasons. 

Remember, you don’t actually have to take your money out of your old 401k plan when you leave, as long as you have more than $5000 in the plan. 

Besides the considerations I talked about earlier this week, that might persuade you to take your money out of your old 401k - namely investment quality and fees, there are a couple of other reasons why you may want to consider consolidating your assets into an IRA. 

Reason #1 - RMD Rules are strict and penalizing. In the year that you turn 70 ½, you’ll start taking Required Minimum Distributions, or RMDs, from your retirement plans. There are some exceptions to starting at 70 ½, that I’ve talked about on my YouTube Channel, so if you want to dive deeper exceptions to that rule, head on over to True North Retirement on YouTube and search for RMD. Subscribe too while you’re there, will ya?

Ok, so back to the RMD rule. Here’s the problem with leaving money in old 401k when you start RMDs...you have to take separate RMDs from each of these 401k plans, which is annoying. Many of these 401k providers like Fidelity, Empower, John Hancock, etc have millions of accounts, so they won’t chase you down at the end of the year if you haven’t taken your RMD. 

If you miss taking your full RMD from all of your retirement accounts, you will pay hefty taxes and penalties on the amount you should have taken, so it’s just a good idea once your RMDs start to move all of your retirement assets into one IRA, with one financial institution, with a good advisor who will hound you starting around Thanksgiving if you haven’t yet taken your full RMD.

Reason #2 why you may want to consolidate your old retirement accounts into a single IRA is simplification. I don’t know about you, but I don’t really want to get statements every month from 4 different places for 13 different accounts. If it’s not necessary for you to have duplicate accounts types spread out across different places, then consider consolidating to simplify your life. It’ll feel like Marie Kondo came in and sparked joy in your financial life when all those accounts are in one place. 

Also, for estate planning purposes, it’s also much easier for your spouse and heirs to sort through everything if it’s all in one place. 

That’s it for today. Thanks for listening. Tomorrow, we’re going to recap the week and I’m going to give you a little preview of next week’s theme. 

My name is Ashley Micciche and this is the One Minute Retirement Tip.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, required minimum distribution, RMD, rmd penalty, ira vs 401k withdrawal rules, rmd aggregation rules, rmd exceptions, IRA rollover rules, IRA transfer, IRA rollover, 401k rollover, what is a rollover, 401k rollover to IRA, 401k rollover rules, 401k rollover to IRA rules, 401k rollover to new employer, 401k option, 401k investment options, 401k plan fees, 401k fees

When you change jobs or retire, you’ll want to decide what to do with that old 401k plan from your previous employer. You really have 3 good options - leave it there, roll it over to your new plan if you’ve changed jobs and your new employer offers a 401k, or you can roll it over to an IRA. But how do you know which option is right for you? 

So this week, I’m teeing up for you 5 questions that you’ll want to ask before you do anything with that old 401k. 

Today’s question that you’ll want to ask before touching that old 401k is: Will you go back to work for your previous employer or do you plan to work part time for your old employer in the future. 

I had a client who retired recently...I use the word retire loosely, because she is actually continuing to work for her old employer, she has just massively scaled back her hours and responsibilities for her old employer. 

This is not uncommon. A lot of people go back to work for previous employers, so if that’s you and you have a 401k parked at your old employer, it may be easier for you to leave your 401k where it is, so you can contribute to it in the future without starting over from scratch with $0 in the plan. 

Keep in mind, your employer will likely have restrictions on whether or not you can contribute to the plan and receive matching dollars if you are part-time. So be sure to find out what those annual hours requirements are if you’re working part-time, and see if you can still contribute to the plan.

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip.

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----------

Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, required minimum distribution, RMD, rmd penalty, ira vs 401k withdrawal rules, rmd aggregation rules, rmd exceptions, IRA rollover rules, IRA transfer, IRA rollover, 401k rollover, what is a rollover, 401k rollover to IRA, 401k rollover rules, 401k rollover to IRA rules, 401k rollover to new employer, 401k option, 401k investment options, 401k plan fees, 401k fees

When you change jobs or retire, you’ll want to decide what to do with that old 401k plan from your previous employer. You really have 3 good options - leave it there, roll it over to your new plan if you’ve changed jobs and your new employer offers a 401k, or you can roll it over to an IRA. But how do you know which option is right for you? 

So this week, I’m teeing up for you 5 questions that you’ll want to ask before you do anything with that old 401k. 

Today’s question that you’ll want to ask before touching that old 401k is: Do you need protections that the 401k plan can provide. 

An interesting rule about 401k plans is that the money inside your 401k is protected from creditors if you file for bankruptcy. 

If you are concerned about your credit and think it’s likely you’ll file for bankruptcy in the foreseeable future, you may consider leaving the money in your old 401k plan, and not rolling it over to an IRA. Since the money is protected inside of a 401k, but not in an IRA. It’s a funky rule and it should be the same across all retirement accounts, but leave it up to Congress to make things complicated. 

My point is that knowing this rule in a bankruptcy situation can potentially shield your precious retirement assets from creditors in a deep, dark bankruptcy situation. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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----------

Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, required minimum distribution, RMD, rmd penalty, ira vs 401k withdrawal rules, rmd aggregation rules, rmd exceptions, IRA rollover rules, IRA transfer, IRA rollover, 401k rollover, what is a rollover, 401k rollover to IRA, 401k rollover rules, 401k rollover to IRA rules, 401k rollover to new employer, 401k option, 401k investment options, 401k plan fees, 401k fees

When you change jobs or retire, you’ll want to decide what to do with that old 401k plan from your previous employer. You really have 3 good options - leave it there, roll it over to your new plan if you’ve changed jobs and your new employer offers a 401k, or you can roll it over to an IRA. But how do you know which option is right for you? 

So this week, I’m teeing up for you 5 questions that you’ll want to ask before you do anything with that old 401k. 

Today’s question that you’ll want to ask before touching that old 401k is: Will the investment options be better? 

When you change jobs or retire, you don’t actually have to take your money out of the 401k plan. If you have more than $5,000 in the plan, you could leave the money there. But you definitely don’t want to leave your money in your old 401k plan if the investment options are a complete dumpster pile of rubbish. 

One of the drawbacks of the 401k plan is that your investment options are chosen for you in most cases, so you can only choose from what’s selected for you. Some plans have a great lineup of funds with good quality and variety. However, I’ve seen my share of complete garbage over the years. 

If you aren’t thrilled about what’s available to you in your old 401k, it might be wise to move your money out sooner rather than later. 

And when you rollover your old 401k to an IRA, you have tens of thousands of investment options that are open to you, and you can hand over your IRA to an advisor who can take care of all the investment management for you - another plus of rolling over your old IRA - freeing you up to focus on other things that are most important to you. 

That’s it for today!  Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, required minimum distribution, RMD, rmd penalty, ira vs 401k withdrawal rules, rmd aggregation rules, rmd exceptions, IRA rollover rules, IRA transfer, IRA rollover, 401k rollover, what is a rollover, 401k rollover to IRA, 401k rollover rules, 401k rollover to IRA rules, 401k rollover to new employer, 401k option, 401k investment options, 401k plan fees, 401k fees

When you change jobs or retire, you’ll want to decide what to do with that old 401k plan from your previous employer. You really have 3 good options - leave it there, roll it over to your new plan if you’ve changed jobs and your new employer offers a 401k, or you can roll it over to an IRA. But how do you know which option is right for you? 

So this week, I’m teeing up for you 5 questions that you’ll want to ask before you do anything with that old 401k. 

Today’s question that you’ll want to ask before touching that old 401k is: How will the fees change? 

Retirement plan fees vary widely. Often the larger the 401k plan is, the cheaper it is. So if you go from mega-multinational-household-name company to mom and pop new 401k, chances are the old 401k from uber-large conglomerate is going to have lower fees compared to your new plan. 

The important point here is that while fees alone shouldn’t drive your decision about what to do with your old 401k, it should be a consideration. So it’s important to understand the fees in your old plan, and how those fees compare to your new 401k or your IRA that your considering transferring your money to. 

401k plan fees are still a bit muddled, despite some major headway made several years ago with some new rules aimed at better fee transparency. 

So if you have no clue how to figure out what your 401k fees are, I have a little workaround for you. Call the provider where your 401k plan is held. Ask them for a document called the 404a-5 Participant Fee Disclosure Document. You’re required to receive a copy of this document at least once a year, but your plan provider should be able to send you another copy if you request one. This 404a-5 fee disclosure document should clarify in plain english the fees in your 401k.

The point here is that you need to know what you’re paying in your old plan if your money is still parked there, and know what the cost is of investing with the new provider - whether that be through a 401k plan with your new job or an IRA. Either way, arm yourself with the cost information so you can make a more informed choice. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, required minimum distribution, RMD, rmd penalty, ira vs 401k withdrawal rules, rmd aggregation rules, rmd exceptions, IRA rollover rules, IRA transfer, IRA rollover, 401k rollover, what is a rollover, 401k rollover to IRA, 401k rollover rules, 401k rollover to IRA rules, 401k rollover to new employer, 401k option, 401k investment options, 401k plan fees, 401k fees

Welcome to a new week and a new theme here on the One Minute Retirement Tip! This week, I’m talking about rolling over your 401k when you change jobs or retire. While you definitely want to keep things consolidated so you don’t have 10 different 401ks floating around from 10 previous employers, it’s also important to understand the pros and cons of rolling over your old 401k.

So this week, I’m sharing with you 5 essential questions you’ll want to ask before you take money out of your old 401k and move it elsewhere. 

We’ll cover the questions you should ask about the fees, investment options, special nuances about 401ks compared to IRAs that very few people know about, consolidation of old accounts, and your intentions about working for this employer in the future - and how all of these considerations will influence what you do with your old 401k. 

That’s it for today. Thanks for listening! Tomorrow, we’re going to dive in by covering a very important but often overlooked question - how will the fees change when you rollover your 401k.

Before you go, please take a minute to leave a review for the One Minute Retirement Tip in Amazon or iTunes. If you find these tips valuable, or if you have feedback for me or topic suggestions, it’s a great way to share the love and share your ideas with me! And thanks to you if you who have already left a review. 

My name is Ashley Micciche...and this is the One Minute Retirement Tip. 

----------

>>> Subscribe on iTunes: https://apple.co/2DI2LSP

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance, wealth management, fee only financial advisor, financial planner, required minimum distribution, RMD, rmd penalty, ira vs 401k withdrawal rules, rmd aggregation rules, rmd exceptions, IRA rollover rules, IRA transfer, IRA rollover, 401k rollover, what is a rollover, 401k rollover to IRA, 401k rollover rules, 401k rollover to IRA rules, 401k rollover to new employer, 401k option, 401k investment options, 401k plan fees, 401k fees