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When should you lock-in an interest rate for your retirement savings?

  • Writer: Serious Money Ohio
    Serious Money Ohio
  • Aug 16, 2022
  • 1 min read

Interest rates are headed higher throughout the economy. The Federal Reserve is using higher interest rates as a tool to slow down the economy and, hopefully, lower inflation.


Where are interest rates higher? Mortgage and car loans are higher. It costs more to borrow money for a home or vehicle.


Also higher are interest rates for savers. Money market rates in some cases are now over 1.5%; much higher than the 0.50% at the beginning of 2022.


Another savers option, Multi Year Guaranteed Annuities (MYGA), has also seen rates increase substantially. For example, a 2-year annuity is now available with a 3.60% rate! A slightly longer 3-year annuity is at 4.50%.


So, is now the time to lock in a two- or three-year rate? It is.


Picture this situation- you have $88,000 in savings and checking at the local bank or credit union. If your bank or credit union is paying the average interest rate on your $88,000, this year you will earn around $44 in interest.

Move $25,000 to a 2-year MYGA and see your total annual interest increase from $44 to $931. The annuity purchase would leave you with $63,000 of emergency/opportunity liquidity.


When suitable, a MYGA is a safe way to earn more interest than savings and checking accounts.


Don’t wait for the economy to slow down and watch interest rates fall below 2% again.


 
 
 

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