Finance Blog

What Low Interest Rates Mean for Your Retirement Savings Plan

Written by Jeff Rose on August 8, 2013 in Retirement  |   2 comments

Low interest rates can mean it’s more difficult to save money, since you aren’t earning as much on your investments. Here are five ways you can update your retirement savings strategy to account for the current low interest rate environment.

retirement, retirement savingsLow interest rates are a double-edged sword: They are great for your mortgage payments but they are bad for your retirement savings. The truth is that when rates are low, the economy is not in good shape. The Federal Reserve lowers interest rates to increase spending and encourage short-term investments. These lower interest rates result in lean retirement for savers because their money doesn’t earn the interest they might have expected.

What retirement investors can expect

Jack VanDerhei, the research director for the Employee Benefit Research Institute (EBRI), warns that nearly 25 percent of baby boomers and generation X investors—who had anticipated having sufficient retirement savings when interest rates were average—will run out of retirement income if the low interest rates are permanent. With that in mind, it is important for investors to account for low interest rates when reviewing their retirement savings plans.

Five options for retirement investors

There are several options for investors who are facing leaner retirements. When interest rates are low, your primary goal should be to protect your income. Determine what you want from your money, including immediate, short-term, and lifetime requirements. Then, make a decision and start a plan.

1. Prioritize finances. Work on paying off accounts with high balances and high interest rates, focusing on accounts that have interest rates in the double digits. You don’t want to spend your retirement income on paying interest—put the money in your pocket instead.

2. Consider alternative investment strategies. Talk to your financial advisor about creating a comprehensive investment plan that spreads out your investments. Avoid long-term money market accounts and CDs—you don’t want your money to be locked up if the interest rates go back up.

Also, avoid risky, high-income investments that promise a large return. Consult with a financial advisor to help you completely understand the product.

3. Ladder annuities. Purchase one immediate annuity each year. Instead of tying up your money in one account with one interest rate, each immediate annuity will have its own interest rate. Fixed indexed annuities create a guaranteed income that you can’t outlive.

4. Choose strong companies. If you are interested in investing in stocks, make sure you are choosing quality companies with strong dividend payments. Don’t take on risky investment strategies without understanding your exposure and potential for loss. Meet with an advisor to create a unique investment plan that caters to you, and limit your volatility when choosing a plan.

5. Be prepared. Don’t rely on a one-size-fits-all approach to your retirement. You need to be ready to adjust your target income and asset allocation each and every year in order to keep up with the current condition of the market and to protect yourself from increases and decreases in rates.

When it comes to retirement, it’s important to be flexible and adapt to change. Otherwise, you might be stuck working a lot longer than you expected—or be forced to live with less.

Jeff Rose is a Certified Financial Planner and Iraqi combat veteran. He blogs at Good Financial CentsSoldier of Finance and Life Insurance By Jeff.


  1. Bill says:

    Usually when interest rates are low, so is inflation. It’s sometimes a wash.

Leave a Comment

Name :

Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.

Retirement Archive

Stay Informed Sign up for our FREE Equifax email Newsletter