How the Looming Fed Rate Rise Will Affect Your Retirement

Federal Reserve The Great Debate
NEW YORK — It’s not uncommon for today’s employees to feel as though they’ll work until the day they die. Thanks to the Fed, that could be reality for much of the American workforce.

According to the new 2015 Life and Money survey released by GOBankingRates, 1 in 5 respondents identified “planning for retirement” as their biggest financial challenge. Some 16 percent of Americans said their biggest fear was never being able to retire at all.

This data isn’t surprising. Monetary policy over the last seven years has motivated borrowers while punishing savers. The Federal Funds rate has hovered from 0 to 0.25 percent since December 2008, making debt alluringly cheap. On the other hand, sources of safe, fixed interest income such as savings and CD accounts have become negative-return investments once inflation is factored in.

Why The Fed Doesn’t Want You To Retire

If it seems as though the Federal Reserve is discouraging Americans from retiring, you’re right.

One of the major goals behind keeping rates down is encouraging spending and spurring economic growth following the Great Recession. Our national income to support domestic GDP could drop significantly if a large number of people retired. “The more people who work, the more money they have,” said Paul Morrow, assistant professor at Husson University’s College of Business in Bangor, Maine. “The more money they have, the more money they spend,”

Hoarding cash with the goal of permanently exiting the workforce contradicts everything the Fed wants to accomplish.

When Will Interest Rates Rise?

That said, the Fed presumably can’t keep interest rates at near-zero forever — though experts have been predicting a rate hike for a long time.

“The rate hike is becoming something like theGreat Pumpkin from the Peanuts cartoons … higher interest rates from the Fed are out there somewhere, but never quite seem to materialize, no matter how patiently we wait,” said Lawrence Solomon, a certified financial planner and director of investments and financial planning at OptiFour Integrated Wealth Management. Like many, however, he expects interest rates will finally go up sometime in the fourth quarter of this year or early first quarter 2016.

The longer we’re all held in interest rate limbo, the more unpredictable — and dramatic — the results of a rate hike will likely be on markets and American’s finances. Unfortunately, no one can say with certainty whether the effects will be mostly positive or negative until it happens. For those who hope to retire some day, that uncertainty is disconcerting at best.

To be sure, some observers of the monetary policy say that a rate hike will be beneficial. “I actually believe that a rate hike will be well-received by the market, as it has been much anticipated,” said Robert R. Johnson, president and CEO of The American College of Financial Services. “The market is suffering from Fed fatigue, and a rate hike would eliminate any uncertainty that market participants have with respect to the Fed. One investment truism that seems universal is that markets abhor uncertainty.”In anticipation of rising rates, there are a few steps future retirees can take to preserve their wealth.


“Investors would be well served to do some sector rotation in their portfolios,” Johnson said. He recommended selling some stocks from industries that perform well during falling rate environments, such as apparel, retail, construction, durable goods and autos, and buying stocks in industries that perform well during rising rate environments, such as energy, consumer goods, utilities, food and steel products.

In the long-run, however, Johnson advised investors to temper their expectations in a rising interest rate environment, as returns on equities will be lower in general.


Investors should get out of bonds and look for other safe, secure options to protect their money, said Michael Foguth, president and founder of financial services firm Foguth Financial Group in Howell, Michigan. “History shows when interest rates go up, bond values go down. Most people use bonds for safe money — when interest rates go up, bonds will no longer hold the title of safe.”

Long-Term Debt

Increasing the fed funds rate directly affects how much it costs banks to borrow from each other. The direct effect for consumers will be that the cost to borrow will increase. “If you have a variable rate mortgage loan or are in the market to borrow money for a large purchase, the fed rate hike will make borrowing slightly more expensive,” said Kyle Winkfield, managing partner at Englewood, Colorado-based O’Dell, Winkfield, Roseman & Shipp, which provides retirement financial services. Borrowers should either lock in today’s low rates, or work to eliminate potentially expensive debt that could eat at future retirement savings.

What the Fed Wants to See Before Raising Interest Rates

Federal Reserve
WASHINGTON — So what will it take for the Federal Reserve to finally raise interest rates?

The U.S. economy is now in its seventh straight year of expansion. It’s growing at a steady if unexciting 2.2 percent annual rate. Unemployment has sunk from a 10 percent peak to a reassuring 5.1 percent. Auto and home sales have accelerated.

Yet on Thursday, Fed officials declined to lift rates from record lows.

The decision left some Fed watchers mystified over what the central bank needs to see to begin phasing out a policy it launched in 2008 to help save a collapsing economy. Many consumers and businesses wouldn’t even likely feel the consequences of a single rate hike, at least not immediately. And Yellen has stressed that the Fed’s rate increases would be modest and gradual.

At a news conference, Fed Chair Janet Yellen declined to spell out what exactly would give the Fed enough confidence to raise the federal funds rate — the interest that banks charge each other — from near-zero.

“I can’t give you a recipe for exactly what we’re looking to see,” she said.

What she does see now are too many lingering risks.

Inflation is still undershooting the 2 percent target that the Fed regards as consistent with stable growth. Financial markets have turned stormy as doubts have spread about whether Chinese officials can sustain decent growth in the world’s second-largest economy.

Emerging markets from Brazil to Malaysia are struggling. Europe is straining to avoid stagnation. And falling oil prices have pulled Canada — the largest U.S. trading partner — into recession.

The doubts remain so severe that the Fed appears to consider even a mild rate hike — one that many economists say will barely affect most Americans — a step too far.

Yellen signaled some concern Thursday about China’s slowdown and volatile financial markets. But many economists say the Fed is paying particular attention to three key gauges in weighing whether to raise rates. They say the Fed needs to see:

A Stable Dollar

The dollar has risen 14.8 percent against a basket of currencies in the past year. This has hurt U.S. manufacturers by causing their American-made goods to become more expensive abroad. It also reduces inflationary pressures because foreign-made goods become cheaper. A stronger dollar can put inflation further below the Fed’s target rate.

Steady Oil Prices

A barrel of oil has more than halved in value to $44.07 over the past 12 months. That decline has suppressed inflation. The Fed forecasts that its preferred inflation measure will be just 0.4 percent this year — a fraction of its 2 percent objective. Fed officials may be reluctant to act until they believe that oil prices have bottomed.

An Even Stronger Job Market

Over the past year, employers have added 2.9 million jobs, and the unemployment rate has dropped a full percentage point to 5.1 percent. The Fed considers that level consistent with a “balanced” economy. But the hiring has yet to spur faster wage growth — a trend that would improve people’s well-being and, Yellen stressed, help inflation reach the Fed’s objective.

The Fed doesn’t want to assume that all three of these economic measures will naturally improve. So on Thursday, it said essentially that it needs more time before finalizing a decision.

But even by the time of the Fed’s October or December meeting, the direction of the world economy might remain hazy. China might be unable to show within a few months that it can manage a transition to slower growth now that its years of 10 percent annual gains are over. Europe might face continued softness.

“It might not be definitive,” said Scott Anderson, chief economist at Bank of the West. “We might have another nail-biter come the December meeting.”

Stocks Fall as Street Mulls Fed’s Rate Decision

Financial Markets Wall Street
NEW YORK — Wall Street stocks closed lower Friday in heavy trading as the Federal Reserve’s decision to keep interest rates near zero fueled concerns about the potential impact of continuing weak global growth on U.S. corporate earnings.

Apart from the state of the world economy, the Fed cited financial market volatility and sluggish inflation at home in its decision Thursday, while leaving the door open for a modest policy tightening later this year.

Friday’s volatility was also likely exacerbated by so-called “quadruple-witching,” when options on stocks and indexes, and futures on indexes and single-stocks all expire, prompting investors to buy or sell shares to cover expiring contracts.

The three major stock indexes each fell more than 1 percent, with all 30 Dow components in the red.

“People are taking this to be another data point of a potentially deflationary environment. Deflation is bad for corporate profits and that leads to lower share prices,” said Stephen Massocca, Chief Investment Officer at Wedbush Equity Management in San Francisco.

The Fed’s decision suggested a global economic environment that is unlikely to foster the kind of earnings growth needed to support stocks at their current, above-average valuations.

Despite recent declines, the benchmark S&P 500 is still trading around 15.6 times forward 12 month earnings, above the 10-year median of 14.7 times, according to Thomson Reuters StarMine data.

“What they introduced [Thursday] was that they’re worried about the effects on U.S. growth based on foreign economies,” said Scott Colyer, chief executive officer of Advisors Asset Management in Monument, Colorado.

More than 10.9 billion shares changed hands on U.S. exchanges, compared with 8.1 billion average for the previous 20 sessions, according to Thomson Reuters (TRI) data.

It was the most active trading day since Aug. 24 when 14.2 billion shares changed hands as markets sold off on concerns about China’s economic growth.

The Dow Jones industrial average (^DJI) closed down 289.95 points, or 1.7 percent, to 16,384.79, the Standard & Poor’s 500 index (^GSPC) lost 32.12 points, or 1.6 percent, to 1,958.08 and the Nasdaq composite (^IXIC) dropped 66.72 points, or 1.4 percent, to 4,827.23.

Oil Price Slide

All 10 major S&P sectors ended lower, with the energy index’s 2.6 percent fall leading the decline on falling oil prices. Industrials and materials also dropped more than 2 percent. Financials fell 1.9 percent as banks would have benefited from an interest rate increase.

For the week, the Dow shed 0.3 percent, the S&P fell 0.1 percent and the Nasdaq rose 0.1 percent.

Investors are now focusing on the next Fed meeting on Oct. 27-28, though a growing number of economists, including those at Morgan Stanley and Barclays, now wonder whether the Fed will raise rates at all this year.

The CBOE volatility index, known as the “fear gauge,” jumped 5.4 percent to 22.28, above its long-term average of 20.

NYSE declining issues outnumbered advancers 2,139 to 929, for a 2.30-to-1 ratio; on the Nasdaq, 1,856 issues fell and 1,026 advanced, for a 1.81-to-1 ratio. The S&P 500 posted 4 new 52-week highs and 18 lows; the Nasdaq recorded 51 new highs and 65 lows.

4 Credit Card Moves to Make Now Before the Fed Raises Rates

Financial Markets Wall Street Federal Reserve

Credit card interest rates have largely been in a holding pattern for the past few years, but that’s not going to last much longer, thanks to the Federal Reserve.

Sometime in the next few months, we’re going to see the nation’s central bank raise a key lending rate. When that happens, your credit card’s APR will go up shortly thereafter. The first time it goes up, it won’t move much — you might not even notice it, honestly. However, it’s likely the Fed won’t stop with just one rate increase, choosing instead to boost rates slowly, steadily over the course of months and years.

While none of those individual increases will be huge, add them all up and they can have a significant impact on your credit card. The good news is that you have time to prepare your finances to handle these changes, and save yourself some money.

Before jumping into that, we’ll explain why this mysterious group of folks in Washington has so much sway over your credit card:

  • The vast majority of American credit cards are variable-rate credit cards, meaning that their APRs fluctuate.
  • Most variable credit card interest rates are tied to the prime rate. That means when the prime rate moves up or down, variable-rate credit card APRs will move up or down as well.
  • What makes the prime rate move? The prime rate moves when the Federal Reserve adjusts its key interest rate called the federal funds rate, which is the rate that banks use to lend to each other.
  • That means when the Fed raises or lowers the federal funds rate, the vast majority of American credit card APRs will rise or fall by the same amount.

The federal funds rate hasn’t increased since 2006, and it hasn’t been lowered since December 2008. In order to help spark a floundering economy, the rate was slashed repeatedly in the midst of the Great Recession until it reached its current level — a range of zero to 0.25 percent, the lowest ever — but has been left alone since.

It’s only a matter of time before that changes. Here’s what you should do to prepare:

1. Get those balances down. As if you need more incentive to pay off your debts quickly, now you can add in the potential for higher interest rates. Again, the rates won’t skyrocket your balances immediately, but over time, the increase will impact your bottom line if you’re carrying big debts.

Consider this:

  • Say you have a $5,000 balance on a card with a 15 percent APR (the typical APR for a new credit card these days). If you make a monthly payment of $150, you’ll end up paying $1,508.52 in interest and taking 44 months to pay the balance in full.
  • Increase that APR to 15.25 percent APR — as would happen with a small interest rate increase by the Fed — and keep the other variables the same, you’ll pay $1,544.74 in interest and pay it off in 44 months. That’s an extra $36 over the life of the balance.
  • However, bump that rate up to 16 percent as the result of a series of increases over a year or so, and suddenly you’re up to $1,656.82 in interest and a 45-month payoff period. That’s an extra $150 in interest from the original calculation.

Of course, shrinking your balance is often easier said than done, but small moves can make an impact. Try to free up cash to increase your monthly payments. Reduce some unnecessary expenses. Sell something of value that you no longer use. It doesn’t take much to make a real impact, and once you see those balances falling, all your sacrifices will be worth it.

2. Consider a balance transfer credit card. Zero percent balance transfer offers are everywhere these days. However, many people think these offers could become an endangered species once the Federal Reserve raises interest rates.

Here’s why: Since the federal funds rate is at basically zero, that means banks essentially are borrowing money for free — getting a zero percent loan. Because the banks are getting a free loan, it can make financial sense for them to offer the same deal to cardholders on a short-term basis. All that will come to an end when the Fed begins to raise its rates. If the banks aren’t able to borrow for free anymore, they likely won’t let you do it either.

Therefore, if you’re thinking of getting a new balance transfer credit card, now is probably the time. These zero percent offers may become a thing of the past. Or if the banks don’t eliminate the zero percent offers altogether, they might make you pay more to get them. For example, they could raise their balance transfer fees from an average of about 3 percent up to 4 or 5 percent, making that great balance transfer offer instantly less appealing.

3. Ask for a reduced interest rate. People don’t realize how much power they have in their relationship with their credit card issuer. A July survey of 1,497 adults showed that 65 percent of people whorequested a lower interest rate from their issuer were successful. Unfortunately, only 23 percent of cardholders asked. That means a lot of people are paying a lot of extra interest unnecessarily.

Even a reduction of a few percentage points can save you hundreds of dollars in interest over the long term, so ask away. It’ll probably help if you have good credit, but even if your credit isn’t spotless, it’s worth giving it a try. Just don’t try too often: The creditor probably will be receptive the first time you ask, but less so if you’re asking for the fourth time in six months.

4. Stay calm. The Federal Reserve’s process of raising rates is going to be a marathon rather than a sprint. You should have plenty of time to prepare yourself for what’s ahead before you start to feel any big impact. And that’s important because people tend to make far better decisions when they can take their time rather than when they feel rushed and pressured.

Matt Schulz is the senior industry analyst at, a site dedicated to helping people make smart decisions about obtaining and using credit. You can follow him on Twitter at @matthewschulz.

Raise Our Interest Rates, Please

Staying informed online
Last week the entire financial world was on tenterhooks, wondering whether or not Janet Yellen and the Federal Reserve would dare to raise interest rates — which are now at virtually zero percent — by a quarter of a point. I turns out, they didn’t. Interest rates are still at zero.

For most of the last decade — ever since 2007 — the U.S. government, courtesy of the Federal Reserve, has been looking at interest rates through the wrong end of a telescope, watching them get smaller and smaller until they have all but disappeared. The result: Americans who are retired, and trying to supplement their Social Security benefits with some income from their savings, have been forced to take a huge pay cut.

Interest rates for American savers are so low, they’re even below our current low inflation rate. According to the U.S. Bureau of Labor Statistics, inflation for 2015 is running about 1 percent, depending on what measure you use. (Inflation in energy is actually negative, but for health care it’s over 2 percent.) If you want to keep your money safe and secure, and invest in a two-year U.S. Treasury bill, you will get paid less than 1 percent. So you’re actually losing purchasing power. If you go to the bank to buy a certificate of deposit, or if you keep your savings in a money market mutual fund, you’ll get virtually nothing. The going rate is less than a tenth of a percent.

A little arithmetic will illustrate the point. If you’ve done a good job of saving money over the course of your career and you have $1 million in the bank, you will receive about $500 or $600 a month from a five-year CD. That’s pretty paltry for a millionaire, and doesn’t go very far in paying your bills. Plus, the $500 or $600 is subject to federal and state income taxes. So, you will likely get even less than that.

The artificially low interest rates are especially punishing for retired people trying to supplement their income with interest from a bank or a bond fund. It also hurts seniors who might want to buy an annuity or get a reverse mortgage. One result is that senior citizens are deprived of income they need to live. Another result is many retirees have reached for more income by purchasing corporate bonds or dividend paying stocks. This strategy has worked, so far. But it exposes our elderly to the gyrations of the stock market, at a time in life when they can least afford to suffer a financial loss.

Over 40 million retired people live on Social Security. Many, like me, rely on interest from their savings to supplement their standard of living. But over the past few years that income has been squeezed down to almost nothing.

But it’s not just seniors. Low interest rates punish anyone who is saving for the future. Trying to save money to build up equity to buy a house, send your child to college or prepare for retirement is a fool’s game. The more you save, the more you lose.

Of course, the low interest rate policy is a good deal for the federal government, which is borrowing money. It’s also been a big help to the real estate industry and the auto industry, as well as banks and financial institutions. The artificially low interest rates have also helped people applying for a mortgage or a car loan — although it doesn’t help, as many young people have discovered, if you can’t qualify for the loan. But for the 60-plus crowd, it’s meant nothing but financial distress.

So, perhaps the Fed has been helping out corporate America long enough. Maybe it’s time to help out retirees for a change. How about raising interest rates so we can earn a little bit of income from our retirement savings? A lot of retired folks, if they got a little better yield on their CDs, would go right out and spend that money. I think they’d do a better job than the banks in stimulating the economy. Don’t you?

7 Bank Bonuses You Don’t Want To Miss

Woman Looking At Banking App On Digital Tablet

Since the financial crisis of 2008, some banks have struggled to regain their form. In addition to huge losses suffered during the crisis, traditional banks now face competition in the form of leaner, meaner online-only banks. With decreasing profits and low interest rates, banks have been forced to use different tactics in order to attract new customers.

This is great news for consumers. With banks fighting to earn your business (and your dollars), you can take advantage of some great deals. In fact, many banks are actually offering you cash simply for opening a new account with them. Here are seven excellent banking promotions available today.

Capital One 360 Savings – Up to $500 Bonus

Capital One 360 Savings is offering a bonus of up to $500 for opening a new 360 Savings account. The online/mobile banking account currently offers a 0.75 annual percentage yield with no maintenance fees. In order to qualify for the bonus, you need to transfer at least $5,000 from an account outside of Capital One to your new 360 Savings account within 10 days of opening.

You also need to maintain that balance for at least 90 days. An important point to note is that I said up to a $500 bonus. Capital One 360 Savings determines the bonus based on a graduated scale. Bonus amounts begin at $50 and climb to $500 on deposits of $50,000 or more. You can see a chart of the complete scale here.

Chase Checking & Savings – Up to $250 Bonus

If you’re looking for great bank bonuses, Chase has some of the best around. Currently, you can get $150 for opening a new Chase Total Checking account. Just make a minimum deposit of $25 and a qualifying direct deposit within 60 days to earn the bonus. Additionally, you’re eligible for a $100 bonus when depositing $10,000 into a new Chase Savings account, provided that you maintain that balance for at least 90 days.

You may combine both offers to earn the complete $250 bonus. To get the promotion, you must enter your email to receive a coupon, which you’ll then need to bring into your local Chase branch. Also, be aware that you aren’t allowed to close the accounts within six months of opening or you’ll lose the bonus.

Chase Premier Plus Checking – $300 Bonus

Chase does it again, offering a $300 sign-up bonus for opening a Premier Plus Checking account.

Although the basic Chase Total Checking account requires only a $500 direct deposit or $1,500 minimum daily balance to avoid account maintenance fees, the Premiere Plus is a little more strict. You must maintain a $15,000 daily balance or link your account towards automatic payments of your Chase mortgage to avoid the $25 monthly fee.

However, the account does earn interest and allows you to avoid Chase fees at non-Chase ATMs. Just open a new Premier Plus Checking account with a minimum deposit of $25, and make a qualifying direct deposit within 60 days to earn the bonus. Again, you’ll need to receive the offer coupon by email and bring it to your local branch when opening the account.

Santander Bank – $20 Monthly Bonus

Rather than offering new customers an upfront bank bonus, Santander Bank’s approach is a little bit different. Santander looks to reward customers for their loyalty by offering a $20 bonus each month. Simply open a Santander Bank extra20 checking and savings account with a minimum deposit of $25 and $10, respectively. You’ll earn $10 per month for making qualified direct deposits totaling $1,500 within each service fee period. You can earn an additional $10 bonus for paying at least 2 bills through their online bill pay system each month. The bonuses will be directly deposited into your extra20 savings account.

PNC – $200-$400 Bonus

PNC offers several different ways to earn a bonus. New customers can earn a $200 bonus for opening either a new Performance Checking or a Virtual Wallet with Performance Spend account. Simply, make qualifying direct deposits of $2,000 or more and pay at least one bill through their online bill payment systemt. You can also earn a $400 bonus for making direct deposits which total at least $5,000 and making one online bill payment. Regardless of the offer, the terms must be completed within 60 days. This offer is only valid for accounts that are opened online.

BMO Harris – $200 Bonus

If you are looking to open a new checking account, BMO Harris will offer you $200 to do it with them. Open any one of their three checking accounts, and you’ll be eligible for the bonus. Simply, set up qualifying direct deposits to be made to your new account, and you’re set to go. The direct deposits must be no less than $300 and be set up to occur no less than on a monthly basis. Further, the first deposit must be made within 60 days of opening the account. To take advantage of the deal, either apply online or have a coupon emailed to you and present it at a local branch.

Key Bank – Up to $300

Key Bank is offering new customers up to $300 in bonuses for opening a new checking account. First, you can earn $100 for opening a Key Hassle Free Checking account. The account features no monthly maintenance fees, no minimum balance fees, and no overdraft fees. All you need to do is make direct deposits totaling at least $500 and use a combination of five debit card or bill payments within 60 days. You can also earn a $300 bonus by opening a premier checking account through Key. To earn the bonus, you must make direct deposits totaling at least $1,000 and use a combination of five debit or bill payments within 60 days. Enter either the promo code MASH0615 or MASC0615, depending on the offer chosen.

Wrapping It Up

If you’re in the market for a new bank, it pays to shop around. Compare each accounts features and make sure that they fit your needs. And, of course, take a look at each bank’s promotional offers. Remember, most offers don’t last forever, so take advantage of them while you can.

4 Checking Accounts You May Not Know Exist

Couple talking to loan officer
Most banks rave about the advantages their checking accounts offer, such as high interest rates, low minimum balances or free services such as online banking. All those accounts appeal to the same general banking public. Other accounts, though, focus on unusual benefits and target specific groups.

Here’s a look at four specialty checking accounts that could meet your particular needs.

Kasasa Tunes

Although some checking accounts give cash back or debit card rewards, Kasasa Tunes targets a younger crowd by offering refunds for digital downloads from iTunes, Google Play or Amazon. The amount may be $10 each month, in addition to a sign-up bonus of up to $25, but the exact refund amount varies by financial institution.

Kasasa is a nationwide brand of free checking accounts developed by Texas-based marketing company BancVue for community banks and credit unions. The Tunes account offers free online and mobile banking services and refunds for a limited amount of ATM fees. It also doesn’t have monthly fees or minimum balance requirements. To qualify for the perks, you usually need to fulfill requirements such as making at least 10 debit card purchases per month and registering for online statements and mobile banking.

Nonprofit Checking

If you help run a nonprofit, such as a charity, church or community gardening club, you might consider an account specifically for your type of organization. Unlike other business checking accounts, nonprofit accounts often come with no monthly maintenance fees and a higher number of free transactions per statement. U.S. Bank, for instance, provides 1,800 free transactions each year for its standard nonprofit checking account, compared to 500 for its premium business checking account. There may be other waived fees and free services as well.

To qualify for this type of checking, you usually need to confirm your organization’s nonprofit status as tax exempt under section 501(c)(3) of the Internal Revenue Code. Eligibility requirements can vary by financial institution, and not all banks or credit unions offer these accounts.

Second Chance Checking

Some people don’t qualify for checking accounts because, in the past, they had an account closed for things like failing to pay bank fees. To get them back on track, financial institutions offer second chance checking accounts, sometimes called “fresh start checking.” Although some big banks like Wells Fargo have them, it’s usually easier to find them at smaller institutions.

These accounts usually come with a monthly fee. They don’t offer overdraft protection programs, since overdrawing an account can often be the first step toward account closures. Another requirement may include attending a financial literacy class. After a year or two of building up credit and banking histories, people may become eligible for traditional checking accounts.

Senior Checking

These accounts are available to people around 50 or 60 years old, with the age minimum varying by institution. Since this demographic tends to rely more on traditional banking than younger generations, senior checking products usually provide free or discounted rates for paper checks.

Fees can be more easily waived with this type of account than with other accounts. Although senior checking may help save money, there can be a high balance requirement, such as $5,000 in some cases, to waive monthly maintenance fees.

It can be a great idea to find a niche checking account, says Carrie Houchins-Witt, a certified financial planner in Coralville, Iowa. “But just make sure that you’re not paying more for an account like that,” she says.

Traditional checking accounts can fulfill most banking needs. Specialty checking accounts like these listed above, though, may fit your precise situation and save you money at the same time.

Stocks Gain as Investors Eye Rate Hike Delay

Wall Street Financial Markets
NEW YORK — U.S. stocks jumped Monday, with the S&P 500 rising for the fifth day in a row, as rising oil prices boosted energy stocks and investors bet the Federal Reserve would not raise interest rates this year.

The S&P’s five-day rise of 5.6 percent was its best five days back to late 2011. Monday saw strong increases in industrials, energy, telecommunications and materials stocks.

Friday’s nonfarm payrolls report for September showed job growth slowed in the last three months, increasing prospects that the era of near-zero interest rates will continue for a while yet.

The missed unemployment number means the Fed is probably going to hold longer.

“Wall Street’s favorite movie is nightmare on your street. The missed unemployment number means the Fed is probably going to hold longer,” said Stephen Massocca, Chief Investment Officer at Wedbush Equity Management in San Francisco.

The Fed, which hasn’t raised interest rates since June 2006, kept its benchmark rate unchanged in September, citing an uncertain global economic outlook and volatile markets.

Traders are pricing in only a 31-percent chance of a December hike, down from 44 percent before the jobs report, according to CME Group’s FedWatch program.

The Dow Jones industrial average (^DJI) rose 304.06 points, or 1.9 percent, to 16,776.43, the Standard & Poor’s 500 index (^GSPC) gained 35.69 points, or 1.8 percent, to 1,987.05 and the Nasdaq composite (^IXIC) added 73.49 points, or 1.6 percent, to 4,781.26.

All 10 major S&P sectors closed higher. The top boost for the industrial index’s 3-percent rise was General Electric (GE). It jumped 5.3 percent after Nelson Peltz’s Trian Fund Management disclosed a roughly 1 percent stake.

Energy stocks jumped 3 percent, boosted by a 1.6 percent rise in U.S. crude oil prices. They were helped by a rally in U.S. gasoline and Russia’s willingness to meet other major oil producers to discuss the market.

Biotech Slips

The Nasdaq biotechnology index fell 0.7 percent, breaking three days of gains. The index was crushed in the previous eight sessions on investor worries about drug price regulations.

The United States and other Pacific Rim countries reached a trade liberalization deal which fell short industry group expectations for drug patent protection.

With third-quarter earnings season starting this week, investors are beginning to factor in what could be the biggest fall in profits for S&P 500 companies in six years. Wall Street expects S&P 500 companies to report a 4.2 percent decline in earnings, according to Thomson Reuters data.

Advancing issues outnumbered declining ones on the NYSE by 2,734 to 373, for a 7.33-to-1 ratio; on the Nasdaq, 2,187 issues rose and 627 fell for a 3.49-to-1 ratio favoring advancers. The S&P 500 posted 9 new 52-week highs and no new lows; the Nasdaq recorded 43 new highs and 33 lows.

Volume was strong with about 7.86 billion shares changing hands on U.S. exchanges, above the 7.32 billion average for the previous 20 sessions, according to Thomson Reuters (TRI) data.

4 Ways Rising Interest Rates Will Affect Your Investments

business man hand showing  red...
Brace yourself: Higher interest rates are on the way at some point this year or in early 2016. The $64,000 question, of course, is when will the Federal Reserve start the first cycle of interest rate hikes since 2006?

Investors have become accustomed to an environment of low interest rates. The Fed has kept its official interest rate near zero since December 2008 to support economic growth and bolster the U.S. economy in the wake of the global financial crisis.

Now, the labor market has improved significantly, with the jobless rate at 5.1 percent in September. The central bank broadcast its intentions to start hiking rates this year in an attempt to move interest rates toward a more historically normal level. The Fed could increase rates at its December meeting or in early 2016.

Higher interest rates can affect investors and consumers in a variety of ways, from simple bank savings accounts to home mortgages. Here is what you need to know about how higher interest rates will affect your pocketbook and portfolio:

Cash will earn higher returns. Savings accounts at banks and certificate of deposit returns have been negligible in recent years as the Fed’s near-zero interest rate policy has punished savers. That trend is about to change. While bank and CD returns will likely move higher at a measured pace, savers will be able to generate a little more return on their cash. “When rates go up, there are going to be winners and losers. Winners will be savers — people who invest in bank CDs and money market accounts. The losers will be borrowers, because the cost of borrowing will go up,” says Ted Peters, CEO of Bluestone Financial Institutions Fund in Wayne, Pennsylvania, and a former board member at the Federal Reserve Bank of Philadelphia.

Longer-dated bond holdings could be hurt. Some investors have stretched out to longer duration fixed-income securities in an attempt to lock in a higher yield in the current low-rate environment. Once the Fed begins raising rates, this could affect longer-dated bonds. “Losers will be people who bought 30-year, fixed-rate bonds, because those values will go down,” Peters says.

Investors may want to consider a shift in their bond maturities. “An average bond maturity of 20-plus years will see about a 13 percent drop in price if rates increase from 3 percent to 4 percent,” says Greg Ghodsi, managing director of investments at 360 Wealth Management Group of Raymond James in Tampa, Florida. “For the past couple of years, we have become very defensive in our bond portfolios. You get defensive by buying shorter maturities. Shorter maturity equals lowers price volatility to interest rate changes. Our average bond maturities are usually eight to 10 years, but for the last few years we’ve moved to a one- to three-year average.”

Stocks can continue to gain, but investors may need to be choosy.Stock investors don’t necessarily need to fear rising interest rates, but some sectors could fare better than others. “While there may be some near-term volatility when the Fed raises rates, it is usually a sign the economy is functioning reasonably well,” says Scott Kim, director of research at Kellner Capital in New York. “In the previous prolonged cycle of interest rate hikes from June 30, 2004 to June 29, 2006 the total return for the [Standard & Poor’s 500 index (^GSPC)] was 15.5 percent.”

Rising rates will help bank stocks, especially community banks and those with a small capitalization, Peters says. “One of the reasons we are bullish on small banks is because when rates rise, banks will make more money because they will have more core deposits, which are very relationship-oriented. Two stocks in that space that we like are Legacy Texas Financial Group (LTXB) because it is an asset-sensitive bank, and the Bank of the Ozarks (OZRK),” Peters says.

Other sectors can also benefit from rising interest rates. “We are looking at the banking, energy, consumer discretionary and the technology sectors since they can do well in this type of market. In addition, we would recommend considering investments in physical commodities and real estate, since they should also perform well in a rising rate environment,” Ghodsi says.

Higher rates can hurt other sectors that are sensitive to rising rates. “Utilities, consumer staples and some real estate investment trusts will not do well in a rising interest-rate environment,” Ghodsi says.

Borrowing costs will rise. Consumers will be faced with higher borrowing costs when the Fed begins to hike rates. For homebuyers considering a fixed- or floating-rate mortgage, it is important to understand how rising rates can affect these choices. The most immediate impact of a Fed rate hike will be on loans tied to short-term or floating-rate debt, says Brian Rehling, the St. Louis-based co-head of global fixed income strategy at Wells Fargo Investment Institute.

Investors would be wise to take the time now to examine their portfolios and loans to consider appropriate shifts with the shifting winds in the interest rate environment.

Fed Policymakers Keep December Rate Hike in Spotlight

Fed Bank Of Atlanta Conference On Federal Reserve: Past and Present
CHICAGO and ORLANDO, Fla. — Two Federal Reserve policymakers whose views are often at odds both suggested Monday they could well support an interest rate hike in December, as long as the economic data don’t disappoint and that rate hikes once begun are gradual.

While two doesn’t make a crowd, their apparent agreement on the plausibility of a December rate increase came just a day after Fed Vice Chair Stanley Fischer said he, too, expects a 2015 hike.

Indeed a large majority of Fed officials believe it will be appropriate to raise rates this year, but after the Fed opted to keep rates near zero at their meeting last month, investors have been increasingly doubtful. Weaker-than-expected data on job creation since the Fed’s most recent meeting has fueled their skepticism, along with few signs that the global economy is poised to pick up.

Traders see about a 40 percent chance the Fed will hike in December, and give about even odds for the January meeting. For October they see a less than 1 in 10 chance, though both Dennis Lockhart, the centrist chief of the Atlanta Fed, and Chicago Fed president Charles Evans, whose views are more dovish, sought to keep even October in the market’s sights.

“I think October is a live meeting, clearly there is the potential that the data coming in, in advance of the October meeting will be sufficient we have a lot more in December,” Lockhart said in Orlando, Florida.

Speaking separately in Chicago, Evans said that while for him waiting until mid-2016 to raise rates would be the “best choice,” doing so earlier wouldn’t necessarily adversely affect his forecast for the economy.

“There is wiggle room” on the timing of the rate hike, he told reporters after a speech, and the economy could probably even withstand a slightly steeper set of rate increases than he, personally, would view as optimal.

It is “way too early,” he said, to know whether a December rate hike, or even an October one, would be appropriate.