3 Upsides of Rising Interest Rates
The Federal Reserve is slowly turning the volume back up on interest rates. For some, there's a silver lining.
As interest rates climb, higher yields on bank accounts aren’t the only bright spot. Don’t overlook these perks.
Increased annuity payouts. If you’re looking to buy an immediate annuity, you may get a larger monthly payout than those who invested when rates were lower, says Hersh Stern, of Annuity Shopper Buyer’s Guide. On deferred income annuities, which delay the payout for a specified period, higher interest rates could also increase the payouts.
Relief on long-term-care insurance premiums. In recent years, premiums spiked as low interest rates hampered insurance companies’ investment returns. Plus, fewer people dropped their policies before receiving payouts than insurers expected. But insurers have accounted for lower lapse rates in new policies, says Jesse Slome, of the American Association for Long-Term Care Insurance. And rising interest rates should help stabilize premiums on new policies.
A larger credit line on a reverse mortgage. The unused portion of a line of credit will grow as interest rates rise (the rate on debt you’ve accumulated will also rise). If you’re thinking of getting a reverse mortgage, consider making the leap soon to maximize growth in a credit line over time.
