If you’re getting ready to retire or you’re already retired, the Federal Reserve just did something that could directly affect how much income you can pull from your portfolio every single month for the rest of your life. And most retirees have no idea that this just happened, and even fewer understand what it actually means for them If you stay with us, you’re gonna realize how the Federal Reserve just did you a favor.

I’m Anthony Saccaro. Thank you for joining us here for the Providence Financial Retirement Show. We are your retirement income source, and this is the place where retirees come for income. Really glad that you’re here today. Thank you for joining us. We’re gonna spend some time talking about the interest rates, the fact that the Federal Reserve just raised them, and of course, along the way, we’re gonna answer some of the questions we’ve gotten about that as well.

So you’re in for a really good show. You know, I’ve been a retirement advisor for twenty-seven years. That just means that I’ve been through the two thousand and one bubble, the two thousand and eight financial crisis, and everything in between. And I wanna tell you straight up, what the Federal Reserve just did matters to your retirement, and I wanna break it down for you in a way that’s going to actually make sense.

The Federal Reserve raised interest rates. This is pretty significant because it’s the first time that they’ve raised interest rates in three years. You might have heard it on the news, and you might have thought, “Okay, so what? My banker just told me that I’m getting a little more interest on my savings account,” and that’s great.

But here’s the thing that most people miss. Interest rates are the backbone of how everything else in the financial world is priced. When the Federal Reserve moves rates, it has a ripple effect that affects almost everything. Your bonds, your CDs, your mortgage, even the value of dividend-paying stock.

Here’s what they’re trying to do with these rate hikes. They’re trying to cool down inflation. Inflation’s been eating away at your purchasing power now for many years. Your grocery bill’s up, healthcare costs are up, energy bills are higher. And the Federal Reserve’s thinking is that if they raise the cost of borrowing money, people will borrow less, they’ll spend less, and prices will come down.

It’s a big economic lever that they’re pulling. Now, whether it actually works or not the way that they hope, well, that’s a completely different conversation. But the point is, they’re doing it, and it’s happening right now in front of you. Here’s what I want you to understand, though, about your retirement specifically.

You can’t afford to make too many mistakes at this stage of your life. In retirement, it truly is all about the income, and interest rates directly affect how much income you can generate. When rates go up, bond values go down. That’s mechanical. Your bond funds or your bond ETFs are worth less on paper right now because the Federal Reserve just raised interest rates.

Here’s the silver lining, though. New bonds are paying higher yields, and that’s actually good news if you’re strategic about it For some of you, these higher rates are going to open up opportunities. If you’ve been sitting on cash or you’re thinking about laddering into bonds, you can lock in better yields than you’ve seen in many years.

But for others of you, especially those who are already in bonds or who haven’t rebalanced in a while, you might actually be sitting on some losses, and sometimes that causes anxiety to creep in. But here’s what I want you to know. If you invest the way that we teach here on the Providence Financial Retirement Show, this is nothing to panic about.

It’s actually something to just understand and to be proactive about instead of reactive. Over the next few segments here, we’re gonna walk you through exactly what rising interest rates means for your portfolio and your taxes, your purchasing power, and what you should actually be doing about it I can just tell you from experience that the clients who stay ahead of these situations, the ones who understand what’s happening and take action, those are the ones who actually sleep well at night.

And that’s my entire goal here on the Providence Financial Retirement Show, is to help you be able to sleep at night and have the peace of mind that you deserve in retirement. But you have to understand the risks. And rising interest rates, although it presents an opportunity, the inflation that cause interest rates to rise, that’s a risk, and it’s one of many risks that I often see retirees overlook.

And because at Providence Financial we specialize in working with retirees, we’ve identified the seven most common risks that I’ve seen retirees make over my career and what you need to do to avoid them. If you’d like to learn what those risks are, I have something I wanna send to you. It’s an animated video that talks about those risks, and it’s fun to watch because it is animated, and it’s only seven or eight minutes, but it’s pretty powerful because we put a lot of information in there.

I wanna get it in your hands just because you’re a regular listener. And in order to get it, all you need to do is go to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video, and we’ll make sure to get it right out. But you’re gonna enjoy watching it. To get your free video to help you understand what the most common retirement risks are so you can identify them and do what you need to to avoid them, all you need to do is go to our website and ask for it, and that’s providencefinancialradio.com/video, and we’ll email it to you shortly.

I’m Anthony Saccaro. Thank you for joining us here for the Providence Financial Retirement Show. We’re gonna spend a lot of our show today talking about interest rates and inflation. The Federal Reserve just raised interest rates, and when interest rates go up, it doesn’t just affect your savings account, it affects every single part of your retirement income strategy.

And here’s what worries me about that. Most retirees don’t realize how connected all of this is until it’s too late. Let’s start with bonds, for example. If you’re in a bond fund or a bond ETF, and most retirees should have some bonds for stability, the value of that fund has just gone down. Why? Because when interest rates rise, the bonds already in those funds become less attractive to new buyers.

They’re paying less than the new bonds coming on the market today because interest rates are now higher. If you need to sell them before maturity, you’re gonna have to sell them at a discount. That’s just a mechanical part that nobody really likes to talk about. Here’s what’s interesting. If you own individual bonds, though, then it really doesn’t matter as long as you don’t have to sell them early.

If you’re living off the interest payment that those bonds are giving you, you don’t have anything to worry about because that interest payment is locked in. That’s just how bonds work. But if you don’t have any bonds or if you have new money that maybe you would like to get more income from, here’s what’s interesting.

New bonds that are coming on the market right now are actually paying much higher yields than they were even just a few years ago. If you have a bucket of cash sitting on the sidelines or if you’re thinking about repositioning, because the Federal Reserve just raised rates, you can now lock in yields that are actually meaningful for your retirement income.

But, and this is important, you have to be strategic. You can’t just jump in without understanding your time horizon and your goals Because it’s got to be just part of a bigger plan. Let’s touch on CDs and savings accounts while we’re at it as well. The rate that your bank is offering, that also just went up, and that’s good news, but here’s the trap.

The interest income that you’re getting from the bank is fully taxable. It’s gonna hit your tax return as ordinary income. And something that we’re gonna talk about a little later in the show is that this extra interest income might actually have a trickle-down effect that could push you into a higher tax bracket or might trigger something that I often refer to as a tax torpedo.

Maybe it causes you to pay more in Medicare Part B premiums, or maybe it causes your IRMAA to rise, and some other effects that you probably haven’t thought of. And again, we’re gonna touch on that a little later in the show. Dividend paying stocks, this is another piece though. When rates go up, dividend yields become more competitive with bond yields.

That can actually be good news for dividend investors because people are less likely to abandon stocks for bonds. But it also means that the value of those stocks can come down in the short term as investors start to rebalance. The dividend itself is usually pretty stable, but that stock price, that’s gonna continue to fluctuate.

And we have a listener question that really is on point with what we’re talking about. Robert from Oceanside wrote in and asked this: “Anthony, I’ve got about two hundred thousand dollars in a bond fund that I’m using for retirement income. With rates going up, my fund value is down about twelve thousand dollars.

Should I sell now and take the loss, or should I hold and hope it comes back?” Robert, really good question. It’s a question that a lot of listeners are asking, and that’s one of the reasons we’re gonna tackle it here on this show. And here’s my answer. It really depends on your time horizon. If you need that money in the next year or two, we probably need to have a conversation about repositioning.

That might be something you need to think about. But if you can hold it for five years or more, bond prices are typically gonna recover when the rate hiking cycle is over. And over the next few years, we don’t know what’s gonna happen, but over the next five years, rates are probably gonna come down. And at that point, you’ll see a reversal of your bond fund, and you really don’t have anything to worry about in the meantime.

The key though, Robert, is just not to panic and make a bad decision, and I’m actually glad you took time to write in. I hope that my answer has helped you. Bottom line is this: rising interest rates create both challenges and opportunities for your retirement income. The trick is knowing which is which, and that’s exactly where we’re gonna help you figure out over the rest of this show.

If you’d like to learn more, I’ve talked a lot about rising interest rates and their effect on you as a retiree in my book, More Life Than Money. It’s an Amazon number one bestseller. Not only do I talk about the effects of rising interest rates, but I also talk about the 10 more common mistakes that I’ve seen retirees make over my career.

I wanna send you More Life Than Money absolutely free of charge just because you are a listener of the Providence Financial Retirement Show. To get it, all you need to do is go to our website and ask for it. Website is providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information, and we’ll get it right out to you.

A brand-new hardcover copy of More Life Than Money will show up on your doorstep in just a few days. One more time, to get your free copy of More Life Than Money, very simple, just go

to providencefinancialradio.com/book and we will get it right out. You’re gonna enjoy reading it

Thank you for taking time out of your day to join us here for the Providence Financial Retirement Show. We are your retirement income source, and this is the place where retirees come when they wanna get income from their portfolio. We’re in the middle of a great show. We’re talking about the fact that the Federal Reserve just raised interest rates, and what does that mean to you?

And there’s one part that I’m generally concerned about when it comes to a rise in interest rates. You know, I’ve been doing this for a quarter of a century, and I can tell you from experience that what we’re gonna talk about now is where a lot of retirees tend to get blindsided. And honestly, it’s not their fault.

Nobody just really explains it clearly, and that’s why we’re gonna touch on it. You just started making more interest income on your savings account and your CDs because rates went up, right? You’re thinking, “Great. Fantastic. That’s extra income I can use.” But here’s what happens. That interest income gets added to your other income on your tax return, and when you cross certain income thresholds, everything changes Let me give you a real example.

Let’s say you’re married, you have Social Security income, you have some investment income, and now you’ve got an extra $8,000 a year in interest from your CDs because the rates just went higher. That $8,000, it could push your modified adjusted gross income over a threshold. Suddenly, it may cause part of your Social Security to become more taxable than it was before.

You might actually jump from 50% of your Social Security being taxed to 85%. And essentially, you just lost a third of the gain in taxes before you even touched that money. And if that’s not bad enough, there’s more. The same income thresholds affect something called IRMAA, Income Related Monthly Adjustment Amount.

This is the Medicare Part B and Part D premium surcharge. If your income crosses that line, your Medicare premiums jump, not by $50 a month. We’re talking maybe two to three hundred dollars a month, sometimes even four hundred dollars a month extra, and it’s all based on income from a couple years ago. So you might not see it this year, but in a couple of years it might show up because of the interest rates that you’re getting today.

How about another example? You retire at 66, you claim Social Security, and you think you’re gonna live modestly and not do much with your portfolio. But then rates go up and suddenly your bond portfolio is producing you an extra $10,000 in interest. That’s gonna push your income up. It may cause your Medicare premiums to jump, something that you probably didn’t plan for.

And you can’t control what the Fed does, but you can control how you structure your income. When interest rates go up, you really have to be proactive and not reactive about your taxes. We have a listener question on this. Patricia from Pasadena asks, “I just got a 1099-INT from my bank for $6,500 in interest income that I didn’t expect.

I’m 68 and I’m on Social Security. How bad is this going to hurt me come tax time?” Well, Patricia, thank you for writing in. The answer is, it depends on your total income picture, but I’m guessing it might be worse than you think. That $6,500 could easily trigger a $1,500 to $2,000 in additional taxes when you factor in Social Security taxation and potentially that Medicare surcharge.

And that’s where the problem is that maybe you weren’t even planning for. And now, with the interest rates just having gone up, you’re probably gonna earn more interest this year than last, which means that next year you might even owe more taxes than you’re thinking of. It really is a situation where interest rates rise, you make more interest on your investments, but then there’s a trickle-down tax effect that if you’re not prepared for, could hurt you, just like in Patricia’s question.

Thank you, Patricia, for taking the time to answer that question. Here’s what you need to do. Before rates go even higher, you need to look at your total income picture and see if there are strategies to manage this. Maybe it’s about where you keep your money, maybe it’s about the order in which you take income, but you can’t afford just to let this happen to you.

You’ve gotta be proactive instead of reactive. Because I’m such a strong believer in being proactive when it comes to your taxes, I put together an animated video that I know you’re gonna wanna watch. It’s all about proactive tax-saving strategies. I wanna email this video to you absolutely free of charge.

No cost, no obligation. You’ll just learn what you need to be proactive when it comes to taxes so you don’t get hit hard with a tax bill because interest rates have gone up. If you wanna get this video, all you need to do is go to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video.

Give us your email and your information, and we’ll send it right on over And very shortly, you’ll be able to watch it and learn about some tax saving strategies that you’re probably not even aware of. To get your free animated video about taxes and being proactive, just go to providencefinancialradio.com/video and you’ll have it shortly.

But I know you’re gonna enjoy watching it. I’m Anthony Saccaro. Thank you for joining us today for the Providence Financial Retirement Show. We’re spending our time today talking about interest rates and inflation and what you need to do to not only take advantage of it, but also be prepared for higher taxes that might come along with higher interest payments.

We’ve talked about bonds so far. We’ve touched on taxes. Interest rates though really have a way of rippling through your life in ways that you might not have even thought about, and I wanna make sure that you see the full picture before they even go higher if that’s the direction that they’re gonna continue to go.

Let’s talk about debt first. If you have a home equity line of credit, a HELOC they’re often referred to, if you’re using it to manage your cash flow in retirement, your payment, it just went up. That’s the bad news. And it might have gone up significantly. A HELOC is usually a variable rate. This just simply means that as the Federal Reserve raises rates, then borrowing costs are gonna immediately rise.

If you were paying seven percent, you might now be paying closer to eight or nine percent, and you’ll see that on your next bill. But it’s a real hit to your monthly budget. If you’re relying on that HELOC as a backup for emergencies, the cost of tapping it just became more expensive. Let’s touch on mortgages.

Very closely in line, but different than HELOCs. If you still have a mortgage in retirement, and a lot of people do these days, if it’s a variable rate mortgage, your payment, once again, also went up. If it’s a fixed mortgage though, you’re protected, and that’s great. Here’s the thing though. If you were thinking about refinancing to a lower rate, well that window, that just closed.

Rates are going up, not down. If you’re stuck with a higher mortgage payment and higher property taxes because of this inflation, that’s money that’s coming out of your retirement income that you probably didn’t plan on. What are some other ways that it could affect you? Well, let’s touch on annuities and insurance products.

If you have an immediate annuity or a fixed annuity, higher interest rates can actually work in your favor. New annuity rates today are probably gonna be much higher than they’ve just been in recent years. And to you, that means more income. I’ve been an annuity expert for two and a half decades, and I can tell you that the amount of interest you could potentially earn today from an annuity is just astronomical.

It’s a lot more than it was even just five or six years ago. And with interest rates going up, they just became even better. If you’ve thought about getting an annuity for some part of your portfolio, it’s really not a bad time. The reason that interest rates went up, though, and something that really concerns me, is because of inflation, the rising cost of living.

When the Fed raises rates to fight inflation, it doesn’t happen right away. It often takes a little bit of time to work its way through the system. In the meantime, your groceries cost more, your utilities go up, your property taxes are higher, and your fixed income in retirement isn’t stretching as far.

And now your debt is even costing you more too, like we just talked about. It’s a squeeze from multiple directions. And James from Ventura wrote in about this. He said, “I’m seventy years old and I still have two hundred and fifty thousand dollar mortgage at six and a half percent. Should I pay it off with my retirement savings or keep it since rates are high?”

Well, James, it’s a very good question. Here’s my answer. It depends on what you’d have to give up to pay it off. If you’re paying off the mortgage means liquidating investments that are generating income for you, you might actually be worse off. But if you have cash sitting idle doing nothing, then paying down that debt and paying off your mortgage, that might actually be a really good idea.

The key, though, is to look at your total picture, not just the mortgage in isolation. And honestly, you really need a real plan, not just a guess. The bigger picture is this, though: higher rates create pressure on your retirement in ways that you might not even see coming, and sometimes it doesn’t show up until a, a year or two down the road.

That’s what I want to help you avoid, and that’s why you need a strategy, not just hope. That’s one of the reasons, though, that honestly I wrote my book, More Life Than Money. I talk about the most common mistakes that I’ve seen retirees make in my quarter-century career of being a retirement advisor, and I also talk about strategy, how to put together a plan that allows you to get income from your portfolio and be able to stay paced with inflation and not have to worry about every economic headline or geopolitical piece of news that comes out.

I want to send you More Life Than Money free of charge because I know you’re going to learn from it. We won’t charge you, no obligation at all. Just you got to ask for it. You can do that simply by going to

providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information and we’ll get a brand-new copy of More Life Than Money right out to you. It’ll show up on your doorstep in just a few days, but you’re really going to enjoy reading it. And I’m going to take a strong guess that you learn a thing or two along the way.

To get your free copy of More Life Than Money right now, just go to providencefinancialradio.com and we will get it right out.

I’m Anthony Saccaro. Thank you for joining us today for the Providence Financial Retirement Show. We are your retirement income source, and this is the place where retirees come for income. We’re having a great conversation about interest rates, the fact that the Federal Reserve just raised them. We’ve talked about some of the tax implications that many of you might not even be thinking of so far, and we’ve talked about what the Fed did.

We’ve talked about how it affects your income and your taxes. It’s important, though, that you understand why they’re doing this, because it really matters to your retirement in a big way. The Federal Reserve raises interest rates primarily to fight inflation. At least this time that’s why they did it.

Inflation, though, it’s often been referred to as the silent killer of retirement. You might not think about it day to day, but it’s the reason that your grocery bill goes higher. It’s the reason that your prescriptions cost more, your electric bill keeps climbing. And in retirement, when you’re living on a fixed income, inflation could eat it alive.

Here’s the math. Let’s say you get four thousand dollars a month from Social Security and your portfolio, and inflation is running at four percent a year. Well, you’re losing purchasing power every single year. In, in ten years, that four thousand dollars might only buy you what twenty-seven hundred dollars buys you today.

That’s not hypothetical. That’s just what happens when inflation compounds year after year. The Federal Reserve’s thinking is pretty straightforward. They say that if we make money more expensive to borrow, which they do by raising interest rates, then people will borrow less, companies will invest less, consumers will spend less, and all of that means that demand will go down.

And when demand goes down, prices stop rising so fast. It’s really elegant in theory, but in reality, it’s pretty complicated whether or not it actually works. Rate hikes take time to work through the economy. We’re talking months, and sometimes we even talk years. There are a lot of other factors at play too.

So it’s not just rate hikes, and it’s not just inflation. There’s supply chain issues, there’s geopolitical stuff, there’s energy prices, right? The Strait of Hormuz and everything that’s going on in Iran has had a lot to do with this inflation that we’re seeing now. And the Federal Reserve can pull their lever, but they can’t control everything.

What I can tell you, though, is this: if you’re in retirement right now, you can’t wait around to see if the Fed strategy works. You need to protect your purchasing power now. And that’s why diversification matters so much. That’s why you just can’t sit in cash or bond. You need assets that can grow with inflation.

Dividend stocks or real estate, inflation-protected securities. You need a strategy that doesn’t depend on hoping inflation stays low. And if you invest correctly for fixed income like we teach about here on the Providence Financial Retirement Show, where we help you get more income than you otherwise generally could on your own, even fixed income can help you stay paced with inflation, but you just have to know how to do it, and you have to do it right.

Linda wrote in with a question, and she’s from Santa Barbara, and her question is this: “I’m retired and living on Social Security and a small pension. My expenses keep going up, but my income doesn’t. How do I protect myself from inflation eating into my retirement?” And that is a question, Linda, that a lot of people have been asking recently and even are gonna start asking more because inflation’s hot off the press, and it’s the right question to ask.

Here’s the truth. If you’re only on Social Security and a fixed pension, you’re pretty vulnerable. You get a cost of living adjustment with Social Security, but oftentimes it lags inflation, and oftentimes Medicare Part B premiums go up just by the same amount of the cost of living adjustment you got. In some regards, that cost of living adjustment for Social Security is almost smoke and mirrors.

You don’t really get more to spend when you’re done with it all. And if you have a pension, sometimes that adjusts, but most pensions don’t even adjust for inflation as well The answer is you need to then compensate for inflation through the use of your portfolio. That might mean changing how your portfolio’s invested.

It might mean if you’re invested for income, not spending all the income that your portfolio is generating. But ultimately, that inflation adjustment, it’s gonna have to come from your portfolio. The good news, though, is that if you’re invested right, especially the way we teach here at Providence Financial, you’ll be just fine because a fixed income portfolio can very much offset the cost of inflation.

And I thank you, Linda, for taking the time to write in that question. If you wanna learn more about how a fixed income portfolio could actually keep pace with inflation, we’ve put together a short animated video that talks all about that. It’s called The Case for Fixed Income, and you’ll learn not only how to get higher income than you probably can on your own, but how you can actually use fixed income investments to offset inflation in a way that you’ve probably never considered.

I’ll send it to you free of charge. We just need your email address. And if you go to our website, providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video.

Leave us your information. You’ll have it shortly, and we’ll send it no cost, no obligation, just because you are a listener. To get your free video that talks about fixed income investing, go to providencefinancialradio.com/video and you’ll have it shortly. Thank you for joining us for today’s Providence Financial Retirement show.

My name is Anthony Saccaro, and we’re talking interest rates. Interest rates and inflation. The Federal Reserve just raised interest rates. What’s that mean for you? We’ve already talked a little bit about taxes. We’ve talked a little bit about your portfolio. But I wanna dive deeper into your actual portfolio because this is where theory meets reality When rates go up, different pieces of your portfolio tend to react in different ways.

If you don’t understand what’s happening, you might actually make a mistake that you’re gonna regret later down the road. When interest rates rise, bonds, they tend to suffer first. That’s the mechanical part. Bond prices and interest rates, they move in opposite directions. When rates go up, existing bonds become less valuable.

But here’s the flip side, though. New bonds being issued today are gonna pay you higher yields. If you have a portfolio strategy that includes bonds, this usually includes an opportunity to rebalance and lock in better rates when rates go up, and we are at that time. If you’re sitting on some cash that you wanna get income from, it’s really a good time, the best time in several years, to be able to lock in higher rates because the Federal Reserve just did you a favor.

Dividend-paying stocks, they also typically hold up better in a rising rate environment as well too, and that’s because people are still hungry for income and dividend stocks offer that, but they still offer the ability to grow your portfolio. Now, prices are gonna fluctuate a lot, but that dividend income is usually pretty stable, especially if you do it the way that we focus on here on The Providence Financial Retirement Show.

When you think about growth stocks, though, these are the high-flying tech companies that don’t pay dividends at all, they tend to struggle when interest rates go up. Why? Because their value was based on the idea that profits for the future were worth a lot today. But when interest rates go up, the math changes.

The future is worth less in today’s dollars, so growth stocks tend to get hit harder than dividend stocks, and this is important in your retirement years and why you should have less exposure to a pure growth strategy And then if you think about real assets like real estate or commodities or inflation-linked bond, these can actually do well in a rising rate environment because they provide a hedge against inflation.

If you’re worried about inflation eating into your retirement, these different asset classes are certainly worth looking into. Here’s the critical part, though: rebalancing. If you had a portfolio that was sixty percent in stocks and forty percent in bonds two years ago and rates stayed low, your stock allocation probably grew to maybe sixty-five or seventy percent, or maybe even more.

That means that today you might be taking more risk than you’re even aware of, more risk than you ever intended to take. In a rising interest rate environment, it’s a really good time to rebalance, maybe sell off some of the winners and buy some of those beaten-down bonds at a higher yields now that interest rates just went up.

You can lock in your gains, and you can reduce your risk exposure at the same time. That’s a double win. Here’s my warning, though: don’t panic sell. Right now, there’s no reason to panic, but we know that the market’s gonna be volatile. There are things that are gonna happen, and if you own bonds and you see them down in value, that could still cause you to panic as well too.

But you don’t ever want to panic. If your bonds are down on paper, that’s not a reason at all to bail. As a matter of fact, if you’re living off the interest rate and you can hold them to maturity, you’re gonna get your principal back anyway, so it really doesn’t matter. The key ingredient, though, is you have to be intentional about your portfolio.

You don’t wanna let it just drift. If you had the same allocation for five years and rates now have changed dramatically and your portfolio’s grown, as it probably has, your risk profile has probably changed, and you’re probably taking more risk than you’re aware of, and that deserves attention. If this all makes sense and you’re not even sure how to rebalance, but you wanna learn more, I talk about that in my book, More Life Than Money.

That’s the entire gist of the book is helping you have more life than money, so you never have to worry about running out of money before you run out of life, and rebalancing is really a critical part of that strategy. I’ll send you More Life Than Money free of charge. To get it, all you need to do is go to our website, providencefinancialradio.com/book.

Again, it’s providencefinancialradio.com/book. Leave us your information. You’ll have it in just a few days, and I know you’re gonna be really glad that you got it. Again, to get your free copy of More Life Than Money, just go to providencefinancialradio.com/book and you will get it absolutely free in just a few days.

Thank you for staying with us. My name is Anthony Saccaro. You’re listening to the Providence Financial Retirement Show. We’re talking about inflation. We’re talking about the interest rates, the fact that the Federal Reserve just raised them. What does all that mean for you and your portfolio and your retirement?

We touched on Social Security just a little bit ago, but I wanna get a little deeper in depth because if you’re on Social Security, you’ve probably noticed something every year, and that is that you get a cost of living adjustment, also referred to as a COLA. You’re probably thinking, “Well, that’s great.

My benefit just went up, so therefore, I’m protected against inflation.” And I hate to be the bearer of bad news, but that’s not quite how it works. Here’s the reality. Your Social Security benefit increases every year based on the CPI. That’s the Consumer Price Index. And it sounds good in theory, but the CPI doesn’t always match your actual price increases.

For retirees, healthcare costs tend to rise much faster than the general CPI. Your prescription drugs tend to cost more and rise faster. Even doctor’s visit costs more. But the cost of living adjustment from Social Security might only be 3%, while your healthcare costs jump 5% or 6%. Oftentimes, you’re actually falling behind.

Let me give you just a real example. Let’s say that you’re getting $2,000 a month from Social Security, and the government says inflation went up 3.2%. So your benefit goes up to $2,064. But your Medicare Part B premiums, they went up 4%. Your prescription drug costs went up 5%. Your out-of-pocket healthcare costs are rising faster than both of those, and certainly faster than your benefit increase.

And over 10 years, this gap compounds. You’re slowly losing purchasing power in the area where it hurts most: healthcare. And this is exactly why you shouldn’t depend on Social Security alone to keep pace with inflation. You need other income sources that can help you grow and offset inflation. Dividend stocks that increase their dividends over time, real assets, anything that is maybe not a fixed payment.

Or if you do have a fixed payment, you’ve got some other investments aside to be able to turn into future fixed payments down the road. Here’s what I tell my clients all the time. You wanna think of Social Security as a foundation It’s not the whole house. It’s reliable, it is semi-inflation adjusted, and you should definitely claim it when it makes sense, but I don’t want you to kid yourself that that cost of living adjustment is fully protecting you against inflation.

It’s not. The strategy is this: use Social Security as your baseline income, but make sure that the rest of your portfolio, your dividends, your bonds, your real assets, that they’re all designed and working together to help you keep pace with inflation and provide you the additional income you need as your life and things you buy tend to get more expensive.

And that way, when inflation picks up or your costs increase faster than the average, you have a cushion And this is why here on the Providence Financial Retirement Show, we’ve always emphasized income in retirement, because the success of your retirement is all dependent on your income, and that does mean that your income has to keep pace with inflation.

Fixed income by itself could be considered its own asset class, and most of you are not familiar with fixed income, and if you try to do it on your own, you’re probably shooting yourself in the foot, probably not getting nearly as much as a firm like Providence Financial could help you get, especially because that’s all we focus on.

That’s our expertise, is in fixed income. If you’d like to learn more, we put together a short animated video that’s called The Case for Fixed Income. By watching it, you’ll at least get an idea as to how to put yourself in a position to have income in your portfolio that will keep pace or even outpace inflation.

You’re gonna wanna watch it. Since you’re tuned into us here on the Providence Financial Retirement Show, I wanna send you this video absolutely free of charge. We’ll email it to you, and you’ll have it shortly. All you have to do to get it, though, is ask, and you can do that by going to our website at providencefinancialradio.com/video.

Again, it’s providencefinancialradio.com/video. Leave us your information, and you’ll have this video shortly. But you’re gonna really love watching it. It’s fun because it’s animated, but you’ll actually learn what you need to know about how to turn your portfolio into an income stream that not only keeps pace with inflation but actually outpaces inflation as well.

One more time, to get the animated video, just go to providencefinancialradio.com/video and you’ll have it shortly. Thank you for joining us today for the Providence Financial Retirement Show. I’m Anthony Saccaro. We are your retirement income source, and this is the place where retirees come for income.

Really glad that you’ve spent your time joining with us, and hopefully you’ve enjoyed the show. We’ve been talking about interest rates and inflation and some of the effects of the recent rate hike that the Federal Reserve has done that you might not have even thought about, and we’ve covered a lot of ground.

The Fed raised rates. Inflation is eroding your purchasing power. Your taxes might go up as a result of that, and your portfolio might even need attention. That’s a lot to digest. Let me give you some concrete action steps that you can actually take this week. First, review your savings strategy. If you have cash sitting in a regular savings account just earning not a lot, that’s a missed opportunity.

Rates just went up. You have the ability to shop around for high-yield savings accounts or CDs that are paying or maybe even four, maybe even five percent now that rates are higher than they were just a few days ago. But remember, that interest is going to be taxable, and you have to factor that into your planning.

Don’t just chase yield blindly. Second, check your tax withholding. If you’re receiving Social Security or pensions, look at your W-4 form. You might need to adjust your withholdings now that interest rate income’s gonna be higher. The last thing you want is to be surprised at tax time. Make sure that you talk to a tax professional if you’re not sure.

Just don’t get caught with your pants down when tax time comes because you’re gonna wind up owing more tax on that extra income than you were aware of. Third, you might wanna consider rebalancing your portfolio. Pull out your last statement. Take a look at your allocation. Are you still aligned with your risk tolerance?

If rates have moved significantly, then the values have probably shifted. You might be taking on more risk than you’ve intended, and rebalancing lets you lock in gains and get back to your target allocations. Fourth, consider locking in higher rates where it makes sense. And this is critical because we only have a small window of time.

And I say that, I mean, we don’t really know how short this window of time is, but they’re not gonna raise rates forever, and at some point in time, they’re probably gonna go back to lowering rates. So we certainly have a window of time. And if you have money that you’re not gonna need for four or five or six years or more, then putting that money strategically into fixed income investments is probably gonna be really beneficial ’cause you can lock in higher rates for a longer period of time than even just a few weeks ago.

And this is something that you might wanna think about doing strategically, maybe not even all at once We have a final question though to round out our show, and it comes from Michael in Irvine who wrote in, “I’m sixty-four and semi-retired. Interest rates are up, my portfolio’s down on paper, and I’m worried.

What should I do first?” Well, again, thank you for the question. We talked about this a little earlier in the show, and here’s my advice. First, take a breath. You’re not alone in feeling this way. When interest rates go up, fixed income portfolios tend to go down in value, but the key is that your income generally is going to stay the same.

If you don’t have to sell, that fluctuation is just noise. It doesn’t mean anything. Think about it this way. If you’re living off of the eggs, then the value of the chickens doesn’t matter because you’re living off the eggs that the chickens are producing. And if you’re living off the dividends and interest, those are the eggs that your fixed income portfolio is giving you.

So even though your fixed income portfolio has fluctuated down temporarily, as long as your interest and dividends are staying the same, as I would hope, then that temporary fluctuation doesn’t matter. And that’s why I say take a breath. You see your portfolio down on paper, but in reality it probably makes no difference whatsoever.

Secondly, you don’t wanna make any big decisions based on fear. No good decisions are made when you’re panicking. Sit down, make sure that you build a plan, look at your actual income needs, not just your portfolio value. When you’re invested for fixed income like we teach here on the Providence Financial Retirement Show, your portfolio value doesn’t mean anything It’s all about how much income can you get.

You need to know how much you spend each year and can your current income cover it. And if it can, you’re fine. And if it can’t, then you need to come up with a strategy to bridge that gap. But the bigger point is this, rising rates create opportunities if you know how to look for them, but they also require you to be proactive, not reactive.

And this is not the time to bury your head in the sand. It’s the time to make sure that your plan that’s in place is still workable, that your allocations are still appropriate, and that you have a strategy going forward. And I truly appreciate the time that you took to write in that question, Michael.

Thank you so much. If this all makes sense and you wanna learn how to develop a plan, that’s exactly why I wrote my book, More Life Than Money. You’ll learn exactly what you need to put yourself in a position to have the best shot of a successful retirement as possible. And since you’re listening to the Providence Financial Retirement Show, you’re in luck because I wanna send it to you absolutely free of charge.

To get it, all you need to do is go to our website, which is providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. You leave us your information, and in a few days, More Life Than Money will show up right on your doorstep, and you’ll be able to read it and learn what you need to know so you can have the confidence and clarity that you deserve in retirement.

And I really know you’re gonna enjoy reading it. To get your free copy of More Life Than Money, just go to providencefinancialradio.com/book and you’ll have it shortly. Well, I’m Anthony Saccaro. We’ve spent our entire show talking about interest rates and inflation and taxes and some of the positives and negatives that come along with a rise in interest rates, and I certainly hope you’ve enjoyed and learned something you didn’t know before.

Thank you for being with us. Really glad that you’ve been here. We’ll see you next week, same time, same place. God bless everyone