How Lower Interest Rates Could Affect Older Adults

When the Fed starts cutting interest rates, retirees could see lower yields on fixed-income assets. Social Security’s finances could be impacted, too.

An older couple look at paperwork while sitting on a sofa in a financial planner's office.
(Image credit: Getty Images)

It’s been four years since COVID-19 reared its ugly head, yet we’re still dealing with the damage it left behind. Since its start in 2020, the pandemic has thrown our economy into a frenzy, forcing the federal government to try to prevent a recession while combating inflation. This has led to a series of changes — some specifically targeting interest rates. Since 2022, the Federal Reserve has raised key interest rates nearly a dozen times, impacting things like the stock and housing markets. But how is it impacting federal programs like Social Security?

Generally speaking, lower interest rates seem like a good thing, especially when it comes to making big purchases like buying a new home or car, but that’s not the case for retirees who are relying on Social Security benefits or fixed-income securities for income. Here’s why: Lower interest rates lead to lower yields on fixed-income assets, which means the monthly payments retirees rely on will most likely be lower than expected. This could become a real problem for older adults who depend on this income to pay bills and buy groceries. But lower interest rates don’t just impact older adults — they affect Social Security’s finances, too.

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Patrick M. Simasko, J.D.
Partner, Simasko Law

Patrick M. Simasko is an elder law attorney and financial adviser at Simasko Law and Simasko Financial, specializing in elder law and wealth preservation. He’s also an Elder Law Professor at Michigan State University School of Law. His self-effacing character, style and ability have garnered him prominence and recognition throughout the metro Detroit area as well as the entire state.