Don’t Let Low-Interest-Rate Fatigue Push You into Taking Too Much Risk

Investors searching for safe short-term places to park their money that offer decent returns have been coming up empty for quite a while. Instead of searching, they should be planning.

A hand putting money into a gold piggy bank
(Image credit: Getty Images)

One of the best things about long-term investing is that just about anyone can do it.

Yes, the stocks in your 401(k) or IRA are bound to dip, or even dive, from day to day or month to month. And that can be scary. However, disciplined investors historically have been able to count on the right mix of high-quality stocks and the magic of compounding to grow their money over the long term.

But what about saving and investing for goals (or needs) that have a tighter timeline? Where can you put your money for short-term safekeeping and still get a competitive rate of return?

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Ah, the Good Old Days

It’s been decades since you could waltz into a bank or credit union and buy a nice, safe certificate of deposit with an interest rate in the double digits. These days, you’re lucky to get 1.25% for a 36-month CD. Bonds can be similarly disappointing. And a good old-fashioned bank savings account, with an average interest rate of 0.1%, according to Bankrate, will give you safety, but not much else.

Unfortunately, it’s been that way for a while now — and it doesn’t look as though it will be changing anytime soon.

The result? Investors with low-interest fatigue have been searching for short-term alternatives, and many have turned to riskier choices in their quest for higher returns.

What could go wrong? We found out when the stock market’s record-setting bull run came to a dramatic end this year. Though the market bounced back quickly from those initial March 2020 lows, investors who panicked and retirees who needed income still sold at a loss. Imagine what would have happened if the market had taken months, or even years, to recover. Hopefully, the experience will lead some to rethink the amount of risk in their portfolio and to find a better way going forward.

Reduce Your Risk with a Real Plan

So, what is that better alternative?

Maybe worry less about individual short-term investment products and more about comprehensive planning.

Because the options are so limited, finding quality investments to meet short-term goals or to fill an income gap can be a challenge. But if your overall financial plan is packaged in a way that provides enough liquidity for emergencies, steadily increasing income to satisfy your lifestyle needs despite inflation, and an accumulation bucket for long-term growth, you won’t have to settle for investments that aren’t right for you.

If your plan checks all the boxes, you can get busy enjoying your life instead of worrying about what to do with your money. That means gathering all the financial facts and designing a plan that will:

Help maximize the amount of income you and your spouse will receive in retirement.

Income planning is all about getting the most for your hard-earned dollars, including:

  • Understanding your Social Security claiming options;
  • Making decisions about your employee pension (lump sum vs. monthly payments; single life vs. joint-and-survivor; etc.);
  • Having a withdrawal strategy for your retirement accounts; and
  • Looking at insurance products, such as fixed annuities, to shore up your reliable income.

Focus on tax efficiency, not just for this year, but for the many years ahead.

Retirees tend to underestimate the consequences of saving all their money in tax-deferred retirement accounts, such as traditional IRAs and 401(k)s. Withdrawals are taxed as ordinary income, and without a plan, the bite can be brutal.

Address future health care costs, including the possibility that you or your spouse may need long-term care.

The U.S. Department of Health and Human Services says someone turning 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years. The price tag? The median monthly cost for a semi-private room in a nursing home was $7,513 in 2019, according to Genworth’s annual Cost of Care Survey.

Put a legacy plan in place for your loved ones.

Now that the SECURE Act has eliminated the popular “stretch IRA” strategy, it’s more important than ever to think about your estate plan and how you might minimize taxes for your beneficiaries.

There isn’t a one-size-fits-all plan when it comes to checking off all those boxes. And randomly choosing strategies and products off the shelf won’t help. Your plan should be packaged based on your goals, your time frame and your tolerance for risk.

Once you and your financial adviser have that comprehensive plan in place, you can discuss the investments that will make it work now and 30 years from now.


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Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Solutions First Financial Group are not affiliated companies. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits, safety, or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. Our firm is not affiliated with nor endorsed by the Social Security Administration, or any governmental agency.


Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Solutions First, Inc. are not affiliated companies. The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger was not compensated in any way.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Joseph Donti, Investment Adviser Representative
Founder, Solutions First, Inc.

Joseph Donti is the founder of Solutions First, Inc. He is a Investment Adviser Representative and specializes in planning and asset preservation. He has passed his Series 65 exam and holds life and health licenses in Arizona. He and his wife, Patty, the company co-founder, have three children and four grandchildren.