Trying to predict what consumers can expect from the Federal Reserve over the next five years is akin to peering into a cloudy crystal ball. No one really knows what the Fed might do—including the Fed—because world events constantly conspire to change the circumstances any decisions would be based on.
Here's what we do know, even without a high-functioning crystal ball: Everyone needs a good investment plan in place, no matter what the Fed's next move is.
Judging from everything going on with the economy and the stock market's volatility, I think it's safe to say the Fed has some real hesitancy about raising interest rates overall. We saw that when it failed to raise rates in June.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
And what's happening with U.S. markets is just one piece of the puzzle. Turmoil around the globe also plays into what the Fed decides. The Syrian refugee crisis, Greece's languishing economy and Brexit—the United Kingdom's surprise vote to exit the European Union—all play a role.
Brexit alone may have led to the Dow Jones industrial average plummeting 500 points one day in June. While it has mostly bounced back, the tech-heavy NASDAQ was down 3.3% in the first half of 2016.
The bottom line is that the world is interactive. Everything happening everywhere these days affects the U.S. market, which in turn affects Fed decisions.
Sadly, with interest rates at an all-time low for such a long time, it's difficult for anyone trying to save money to generate any kind of return without taking on more risk. Certainly, your money is nice and safe in a savings account or a CD, but the interest rates they pay are so small as to be practically nonexistent.
My advice? Keep an open mind about different tools that can help you generate income and cash flow. That might include high quality dividend-paying stocks, a solid fixed-rate annuity with an insurance company or, for a small percentage of your portfolio, income-producing real estate that's well diversified.
Even if the Fed does begin to raise rates, it's likely to be a process that limps along gingerly because of the world economic situation, with increases happening at just a quarter of a percentage point at a time.
But I'm convinced interest rates will indeed go up over the next five years, and I make that prediction not just because of some nifty crystal-ball gazing.
It's simply that up is just about the only direction available.
Bryan S. Slovon is founder and CEO of Stuart Financial Group, a boutique financial services firm exclusively serving retirees and soon-to-be retirees in the D.C. metro area. He is an Investment Adviser Representative and insurance professional.
Yvette Hammett contributed to this article.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
-
Serious Medical Diagnosis? Four Financial Steps to TakeA serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
-
To Stay on Track for Retirement, Consider Doing ThisWriting down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
Within Five Years of Retirement? Five Things to Do NowIf you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
-
The Home Stretch: Seven Essential Steps for Pre-RetireesThe decade before retirement is the home stretch in the race to quit work — but there are crucial financial decisions to make before you reach the finish line.
-
Three Options for Retirees With Concentrated Stock PositionsIf a significant chunk of your portfolio is tied up in a single stock, you'll need to make sure it won't disrupt your retirement and legacy goals. Here's how.
-
Four Reasons It May Be Time to Shop for New InsuranceYou may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
