Friday, June 22, 2018
Business

Rising interest rates cut both ways for seniors

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
Tampa Bay workforce development initiative looks to Houston for lessons

Tampa Bay workforce development initiative looks to Houston for lessons

The biggest hospitals in Houston had a problem.To earn a prized institutional certification, they needed more nurses with bachelor of science degrees in nursing.But local colleges were more focused on turning out nurses with two-year degrees who, to ...
Updated: 4 hours ago
Health care IT company CareSync shuts down, laying off 292

Health care IT company CareSync shuts down, laying off 292

TAMPA — The days ahead were supposed to be bright.For weeks, the future of health care tech company CareSync had been thrown into question as founder and CEO and founder Travis Bond unexpectedly departed, kicking off multiple rounds of layoffs. But t...
Updated: 4 hours ago
Coal and gas hold onto their share of electricity production, despite massive push for renewables

Coal and gas hold onto their share of electricity production, despite massive push for renewables

Here’s an intriguing set of facts: Coal produces the same percentage of the world’s electricity as 20 years ago. Oil and gas remain about level, too.Same for nonfossil fuel sources. In other words, the massive push towards renewables over the past co...
Updated: 6 hours ago
Brink: Why have Florida’s working-age men left the labor market in droves

Brink: Why have Florida’s working-age men left the labor market in droves

A cancer lurks within Florida’s otherwise rosy job numbers, one that’s been called a quiet catastrophe and an intractable time bomb.Too many men between the ages of 25 and 54 have stopped working.Economists call those the prime-age years. Incomes gen...
Updated: 6 hours ago
Pride divided no more: St. Pete Pride comes back together

Pride divided no more: St. Pete Pride comes back together

ST. PETERSBURG — The 16th annual St. Pete Pride Parade is getting ready to march along the downtown waterfront the second straight year. But many hope to move past the division caused last year when the parade was uprooted from its original hom...
Updated: 11 hours ago
For sale: A Tampa Bay area elementary school where you can eat tacos and buy wine

For sale: A Tampa Bay area elementary school where you can eat tacos and buy wine

ST. PETERSBURG — For sale: a 104-year-old elementary school with restaurant and wine shop. It even has a title company where you can close the deal.Less than a year after completing a major renovation of the historic North Ward school, developer Jona...
Published: 06/22/18
Domain Homes: Buyers love them, some others don’t

Domain Homes: Buyers love them, some others don’t

TAMPA — When the 2008 financial crash brought down the nation’s housing market, hundreds of home builders went out of business. Among them was Sharon McSwain Homes in Atlanta, forced to liquidate in 2009.But just as developers like to develop, builde...
Published: 06/21/18
Updated: 06/22/18
Armature Works developers sue Ulele and city of Tampa over use of nearby building

Armature Works developers sue Ulele and city of Tampa over use of nearby building

TAMPA — Two of the city’s hottest developers — the companies behind Ulele and the Armature Works — are heading to court over control of an old city building that sits between the hit eateries. Both want to redevelop the city&...
Published: 06/21/18
Orlando airport first to scan faces of U.S. citizens on international flights

Orlando airport first to scan faces of U.S. citizens on international flights

Associated PressFlorida’s busiest airport is becoming the first in the nation to require a face scan of passengers on all arriving and departing international flights, including U.S. citizens, according to officials there. The expected announcement T...
Published: 06/21/18
Saboteur or whistleblower? Battle between Elon Musk and former Tesla employee turns ugly, exposing internal rancor

Saboteur or whistleblower? Battle between Elon Musk and former Tesla employee turns ugly, exposing internal rancor

Hours after Tesla had sued its former employee on charges he had stolen company secrets, and days after chief Elon Musk had called him a saboteur, the Silicon Valley automaker made a startling claim. The company had received a call from a friend of t...
Published: 06/21/18