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Section 7

Interest Rate Fluctuations

Interest rate fluctuations can have a dramatic impact on
retirement income and savings. When interest rates go down,

the income that investors depend on will also decrease. Lower
interest rates that result in lower income may require retirees to

dip into principal. With less principal to earn interest, income
drops even lower. Rising interest rates may help retirees by

increasing the return on their fixed income investments, but it
can also adversely affect the value of their fixed-income portfolio.

Falling Interest Rates

When it comes to investing for income, many investors

have traditionally turned to fixed-income investments, such
as certificates of deposit (CDs) or Treasury bonds. These

investments offer the advantage of safety of principal and
income that can be relied upon year in and year out. Although

many fixed-income investments safeguard principal, it’s
critical to take into account that interest rate fluctuations may

Chapter 5: Things That Can Wreck Your Retirement