Tuesday, November 21, 2017
Business

Rising interest rates cut both ways for seniors

RECOMMENDED READING


For seniors who rely on interest income, a recent rise in interest rates is good news. But for others, heavily invested in bonds or bond mutual funds, it's not so good.

Rising interest rates hurt the value of already-issued bonds. That's because newly issued bonds pay a higher interest rate, making them more attractive to investors.

And rates have been on the rise. The yield on the 10-year U.S. Treasury bond — a benchmark for many kinds of interest rates — has risen from 1.63 percent in May to 2.75 percent last month.

"Bond values are beginning to fall," said Tom Murphy, certified financial planner. "Anyone who owns a bond yielding current low interest rates is going to have a hard time selling that bond when rates move up simply because everyone always wants as much interest as possible."

So if you've been invested in bonds, how should you adapt?

"We would caution against abandoning bond allocations altogether," said Mary Ellen Stanek of Robert W. Baird Co., a wealth management firm.

She does recommend, however, that seniors think strategically about their portfolios.

RETURNS VS. RISK: Alternative investments, such as stocks, may offer higher potential returns than bonds, Stanek said, but they also come with higher risk.

Bonds aren't returning much right now, but they provide good diversification, she said. They also offer relative safety.

"Most seniors can't/shouldn't/don't want to take on the volatility of an all-equity portfolio and, therefore, maintain at least some exposure to bonds," Stanek said. "Furthermore, many seniors rely on the income from their bonds to meet living expenses, so bonds typically play a key role in their portfolios."

BONDS VS. FUNDS: Murphy said investors should avoid bond mutual funds and stick with individual bonds.

"If you want to stay in bonds, buy individual bonds and plan to keep them until they mature," he said.

With an individual bond, you can choose to hold the bond until maturity and recoup at least the face value, no matter how much the price fluctuates in between, he said.

If you do invest in a bond fund, Stanek said, "look for funds with below-average expense ratios to keep costs in check."

SHORT VS. LONG: Stanek said investors should stick with short- to intermediate-term high-quality bonds. That's because longer-term bonds are more sensitive to rising interest rates than shorter-term bonds.

Going with shorter-term bonds does come at a price.

"These bonds typically pay less than longer-term bonds and riskier bonds, so their low yields may not be right for investors with longer time frames," said Rick Salmeron, a certified financial planner.

One strategy is to build a "ladder" of bonds that mature at different intervals, such as at three months, six months and 12 months, Salmeron said.

Comments
Crime Stoppers, Straz Foundation still working out Seminole Heights reward money

Crime Stoppers, Straz Foundation still working out Seminole Heights reward money

TAMPA — You can collect $110,000 in reward money for information leading to an arrest in the Seminole Heights killings, but for now you’ll have to make two stops.The David A. Straz Foundation announced Monday it would contribute $10,000 to a reward f...
Updated: 2 hours ago
Barricades reinforce security for holiday events on St. Petersburg’s downtown waterfront

Barricades reinforce security for holiday events on St. Petersburg’s downtown waterfront

Times Staff Writer ST. PETERSBURG — World and national tragedies are changing the city’s approach to security for special events at North Straub Park.With the approach of the holidays, concrete barricades have been erected at a section of the park’s ...
Updated: 7 hours ago
Ybor ’s first public school, long gone, still has a story to tell about district’s history

Ybor ’s first public school, long gone, still has a story to tell about district’s history

TAMPA — It’s been more than a century since Ybor City’s first public school was demolished on the plot of land now identified as 1311 E. Eighth Ave.For the past 22 years, the popular concert venue New World Brewery took up the space and one next door...
Published: 11/21/17
Up for sale? Activist investor grabs stake in Tampa’s Bloomin’ Brands

Up for sale? Activist investor grabs stake in Tampa’s Bloomin’ Brands

TAMPA — If you tread water too long in the same spot, someone might start asking why you’re not trying to swim somewhere.Tampa’s Bloomin’ Brands — parent company of such prominent restaurant chains as Outback Steakhouse, Carrabba’s Italian Grill and ...
Updated: 13 minutes ago
Hurricane Irma hurt some Tampa Bay home sales even in October

Hurricane Irma hurt some Tampa Bay home sales even in October

Pinellas County home sales took another hurricane-related hit in October as the rest of the Tampa Bay area bounced back from Hurricane Irma.But while prices in all four counties rose once again, the rate of increase continues to slow. Hillsborough’s...
Updated: 1 hour ago
St. Petersburg council okays restaurant deal for Manhattan Casino

St. Petersburg council okays restaurant deal for Manhattan Casino

ST. PETERSBURG — The City Council on Monday approved a lease for the Manhattan Casino, a landmark building in the city’s historic African-American business and entertainment community.It was a controversial decision for some of the city’s black resid...
Updated: 2 hours ago
Give thanks: Florida’s higher gas prices starting to dip again for holiday

Give thanks: Florida’s higher gas prices starting to dip again for holiday

TAMPA — As 5.5 million Americans hit the road this week, gas prices will be the highest for the Thanksgiving holiday in three years though they are starting to dip. The average for regular gasoline in Florida is $2.50, 40 cents more than a year ago,...
Updated: 4 hours ago
Eight women say Charlie Rose sexually harassed them - with nudity, groping and lewd calls

Eight women say Charlie Rose sexually harassed them - with nudity, groping and lewd calls

Eight women have told the Washington Post that longtime television host Charlie Rose made unwanted sexual advances toward them, including lewd phone calls, walking around naked in their presence, or groping their breasts, buttocks or genital areas.Th...
Published: 11/20/17
Tampa Electric, contractor fined $43,000 in gas leak

Tampa Electric, contractor fined $43,000 in gas leak

APOLLO BEACH — The federal Occupational Safety and Health Administration fined Tampa Electric $18,108 and gave the company two "serious" citations for its response to a gas leak at the Big Bend Power Station in May, the agency announced late Friday.T...
Published: 11/20/17
Forecast: Florida retailers expect strong holiday shopping sales

Forecast: Florida retailers expect strong holiday shopping sales

‘Tis the season for holiday shopping, and this year is expected to be particularly kind to retailers.The Florida Retail Federation’s holiday shopping forecast predicts that a combination of high consumer confidence, strong tourism numbers and a littl...
Published: 11/20/17