How Rising Interest Rates Affect Your Retirement Money

You’ve probably noticed it at the bank. That CD rate that was practically zero for years? It’s finally offering something decent. Your savings account might even be paying a little interest again.

But here’s what many people nearing or in retirement don’t always realize: when interest rates climb, it’s not just your savings account that changes. Your entire retirement picture shifts—and not always in ways you’d expect.

Maybe you’re 62 and wondering if now’s the right time to retire. Or you’ve been retired for a few years and suddenly your bond fund statement looks different. Either way, you’re probably asking the same question:
“Is this helping me or hurting me?”

The answer varies for everyone—but it’s definitely worth understanding.

Your Bonds Might Be Worth Less Right Now

Many retirees count on bonds for steady income and safety. But here’s what often surprises people: when interest rates rise, the value of existing bonds drops.

Two years ago, a 10-year Treasury bond yielding 2% might have seemed like a safe move. But fast forward to today, and new bonds are offering 4% or even 5%. That shift in interest rates makes the older bond far less appealing on the open market. As a result, its value drops—especially if you’re forced to sell before it matures.

This especially impacts bond funds. Many retirees now face the unexpected reality that their “safe” bond fund has lost value. It’s not broken—it’s just how bonds respond to rising rates.

Start by reviewing how long-term your bond holdings are—longer terms take bigger hits when rates rise. If you own bond funds, take a closer look at what types of bonds they actually hold. And if you hold individual bonds to maturity, you’ll still get back your full principal (assuming no defaults).

The Upside: Safe Income Is Finally Back

Here’s the good news: you can finally earn decent returns on safe investments again.

CDs are paying rates we haven’t seen in over a decade. Fixed annuities are offering guaranteed returns that actually mean something. Even high-yield savings accounts are worth a fresh look.

For years, retirees had to choose between tiny returns or riskier options. That’s starting to change—and it opens up possibilities that weren’t there before.

Consider CD laddering to provide steady, flexible income that adjusts as rates change. Fixed annuities can now lock in guaranteed lifetime income at rates that make sense. Just be sure to compare your options carefully before committing long-term—rates and terms vary widely between companies.

The Cash Trap You Want to Avoid

When markets feel uncertain, it’s tempting to move everything into cash.
“At least I’m not losing money,” you think.

But if you’re earning 4% on cash while inflation runs at 3% or higher, your real return is closer to 1%. Over 20 years of retirement, that gap adds up to serious lost purchasing power.

The challenge is finding the right balance—some safety, some growth, and enough flexibility to adapt when things change.

Keep 12–18 months of expenses in readily available cash or equivalents. Beyond that, let the rest of your portfolio work harder than cash alone. Look for growth strategies that don’t require taking on big risks—there are more middle-ground options now than just a few years ago.

Your Debt Just Got More Expensive

Still carrying a mortgage, home equity loan, or credit card balances? Rising rates mean higher monthly costs—and that can quietly eat into your retirement cash flow.

Many retirees are seeing their variable-rate debt payments creep up month by month. Others are weighing whether to pay off a low fixed-rate mortgage or keep that cash invested at today’s higher returns.

Start by tackling any variable-rate debt to free up future income and stop the bleeding. That low fixed-rate mortgage you locked in a few years ago? It might still make sense to keep it—but run the numbers for your specific situation. And be extra cautious about taking on any new debt when borrowing costs are substantially higher.

Your Retirement Plan Needs a Fresh Look

The financial world has shifted. Strategies that worked when CDs paid nothing and bonds yielded 2% may no longer be the best fit for your goals.

No need for panic or sweeping changes. What matters now is making sure your income plan still fits today’s reality—not the world as it looked three years ago.

Ask yourself:

• Is your money generating the income you actually need?
  
• Are you taking the right level of risk for the returns you expect?
  
• Can your plan adjust if rates continue to move around?
  

These aren’t just academic questions. They determine whether you can maintain your lifestyle, handle unexpected expenses, and sleep well at night.

Building a Plan That Works No Matter What

Interest rates will rise and fall—that’s guaranteed. But your retirement shouldn’t be built on guesswork.

The smartest retirees aren’t trying to predict every Fed move. Instead, they’re building income plans that adapt to different environments. They want strategies that work whether rates stay high, drop back down, or bounce around unpredictably.

Your retirement deserves more than a set-it-and-forget-it approach—especially when the financial landscape keeps changing.

Your retirement is too important to navigate alone in a changing world. Let’s make sure your plan is ready for whatever comes next.

Call Barb Swiatek at 719.597.2179.Whether your bond funds have you worried, you’re curious about today’s income opportunities, or you just want confidence that your plan still makes sense—this is the right time for that conversation. Your money should work for the life you want to live, not the other way around.