Will Fed Rate Cuts Hurt Savers and Retirees?

Timing is the whole ballgame with rates (yes, right now)

Timing is the whole ballgame with rates, and yes, right now it matters a lot. Not because I love drama, but because your calendar can be the difference between a smooth retirement paycheck and a stress-test you didn’t sign up for. The order of returns, the month you lock a yield, and the sequence of your withdrawals either compound in your favor or quietly chip away at your safety margin.

Quick reality check: sequence risk is sneaky. Two portfolios can post the same average return and end up with wildly different outcomes depending on when the bad years hit. Simple illustration I show clients all the time: start with $1,000,000, withdraw 4% ($40,000) adjusted for 3% inflation each year, and assume a long-run 7% average return. If the first five years are -15%, -10%, 0%, +5%, +8% (ugly front-loaded), the plan can hit a wall in the late 20s. Flip the sequence, good years first, bad years later, and you can still have seven figures after 30 years. Same average, different path. That path is what keeps people up at night.

Sequence risk isn’t about how much you earn on average. It’s about when the hits show up.

Now layer rates on top. Locking in yield when it’s high buys you certainty, sometimes for years. Cash-like rates were unusually generous last year and earlier this year: the 3‑month Treasury bill spent most of 2023 and 2024 above 5% (FRED data), something we hadn’t seen since before 2007. On the policy side, the Fed’s December 2024 Summary of Economic Projections pointed to about 75 bps of cuts penciled in for 2025. Markets spent chunks of this year pricing a shift toward easier policy. Translation: waiting around could mean that a 5% CD becomes a 4% CD, then a 3‑handle on fixed annuities, and your “income floor” steps down for years, not weeks.

Where I get a little animated here, probably too animated for a Sunday coffee, is that different parts of your financial life run on different clocks:

• Cash and T‑bills: reset fast. When the Fed cuts, yields follow quickly. Great for borrowers, not great for savers who procrastinate.
• Intermediate bonds: move with rate expectations as much as actual moves. Prices can rally before the cut arrives, pushing future yields down.
• Fixed annuities and multi‑year guarantee (MYGA) rates: track corporate bond yields with a lag. Miss the window, and your guaranteed rate might be 50-150 bps lower for the whole term.
• Debt costs: HELOCs/credit cards float quickly; mortgages refi only if it’s worth the friction. Different calendars, different math.

What you’ll learn in this section: how to reduce sequence risk, when it pays to lock a yield versus keep dry powder, and why planning by horizon, 1 year, 3-5 years, 10+, beats reacting to headlines. We’ll map cash buckets, discuss which maturities to nail down while policy is drifting easier this year, and yes, we’ll talk about the tradeoffs. Because nothing is absolute, and context always wins.

My take, and it is just a take: with the Fed leaning easier in 2025, the default mistake is waiting too long to secure multi‑year income. Even small timing errors, one or two missed decisions, compound into big retirement headaches. Better to set the clock now than let the clock set you.

From 5% savings to “uh‑oh”: what falling yields do to your cash

Cash moves first. When the Fed starts easing, banks and money funds don’t wait around, they shade rates down early. Great if you’re borrowing. Less fun if you got used to fat yields sitting in money markets or that online savings account you opened in 2023. I remember logging in late last year and seeing a 5.0% APY like it was normal. It wasn’t normal. It was policy doing heavy lifting.

Context helps. In 2023-2024, online savings accounts and 1‑year CDs regularly printed 4%-5%+. One‑year Treasuries even kissed the mid‑5s at points in 2023. Money market funds’ 7‑day yields hovered ~5.2%-5.3% for a long stretch. Compare that with inflation: headline CPI ended 2023 at 3.4% year‑over‑year (BLS), and ended 2024 also at 3.4% YoY (BLS). So your real return, nominal minus inflation, was meaningfully positive. That’s rare. This year, as policy leans easier, new cash offers drop first. Existing CDs you locked still pay, but fresh money? It resets lower fast.

We need to talk real return because it’s the part that sneaks up on people. If your online savings drifts from 4.9% to 4.2% while headline CPI is bouncing in the mid‑3s, your margin shrinks quickly. And if CPI surprises one month, say an energy pop, your after‑inflation return can go from “nice” to “meh” in a hurry. Nominal dollars feel good. Purchasing power is the point.

So triage the cash. Different jobs, different tools:

• Emergency fund: Keep it liquid. FDIC‑insured savings, a conservative money market, or a checking/savings combo. The job is reliability, not squeezing the last 15 bps. I keep ~6 months because I sleep better; some folks do 3. Your call.
• Near‑term spending (3-18 months): Short CDs or T‑Bills. If 6-12 month maturities still offer a rate edge today, take it. If the curve is sagging, you can mix 3, 6, 9, 12 months to avoid getting stuck reinvesting everything at once if yields slide.
• Surplus cash (2-3 years): Start extending a bit. Not a hero trade, just nudge duration. 18-36 month CDs/Treasuries where the yield pick‑up is worth the flexibility you give up.

Ladders help here. A simple 6-12-18-24 month CD or Treasury ladder staggers maturities so you’re always rolling a piece. That reduces reinvestment risk if the Fed keeps trimming. If yields keep sinking, each maturing rung was locked higher. If yields surprise up (it happens), you’re not trapped because another rung matures soon. It’s the “don’t be all‑in on any single month” approach.

One more thing I keep reminding clients, and myself when I get cute with rate timing. Banks cut deposit APYs early in easing cycles, while loan rates (like credit cards) don’t give back much. Average card APRs still sit around 21%-24% this year depending on your score, call it “around 22%.” Which is wild when you think about it. Point is, don’t expect your savings rate to hang up near 5% while everything else glides lower. The spread is the business model.

TL;DR for cash right now: accept that the easy 5% era is fading, keep the emergency pile ultra‑liquid, lock near‑term needs in short dated paper, and extend a bit with a ladder on surplus. If we get another inflation wiggle, you know how gas prices love to do that, you’ll be glad your maturities are staggered. And if we don’t, you captured yields before the floor slipped. I wish I could say there’s a perfect timing bell. There isn’t. Laddering is the closest thing I’ve found to not needing one.

Retirees and the paycheck puzzle: funding income when rates head south

Here’s the odd bit about falling rates that trips people up: your existing bond funds can actually look better on paper while your fresh cash earns less. When policy rates drop, bond math says prices rise. If you already own intermediate bonds or a core bond fund, you may see green as yields compress. But any new dollars you put to work, coupons reset lower. That’s the reinvestment squeeze in real time.

Two quick anchors so we stay grounded in facts. The Fed funds rate topped out at 5.25%-5.50% in 2023, the highest since 2007. The 10‑year Treasury spent long stretches near ~4% across 2023-2024, sometimes higher, sometimes lower. Those higher rates helped immediate annuity payouts and bond fund yields. Now, if we’re in an easing phase this year, new buyers don’t get those same coupons. You own yesterday’s yield only if you already locked it in.

“You own yesterday’s yield; new buyers live with today’s yield.” I’ve said that one in too many client meetings, but it sticks.

Annuities are the cleanest example. Single‑premium immediate annuity (SPIA) payouts jumped when rates spiked in 2023-2024, carriers could invest premiums at higher yields, so monthly income improved. As rates fall, newly quoted SPIA income generally drops. No magic there. If you’re price‑shopping income today versus, say, late 2023, expect lower monthly checks for the same premium. One data point for context: Social Security is still the bedrock, SSA estimates benefits replace roughly 37% of the average worker’s pre‑retirement earnings (SSA methodology; not a promise for everyone). Translation: most households need portfolio income to fill the gap, and that gap widens a bit when market yields compress.

So what do we tweak?

• Keep a cash bucket sized for 1-3 years of withdrawals. This reduces sequence risk, if stocks or longer bonds wobble in a down year, you’re not forced to sell at a bad time. Personally, I like 18-24 months for most folks and lean to 36 months for the more skittish or single‑income households.
• Match income sources: use guaranteed checks (Social Security, pensions, annuities) to cover essential bills, housing, utilities, meds, groceries. Keep travel, gifting, home upgrades under the “discretionary and variable” bucket. If yields fall, you trim the Italy trip, not the property tax payment.
• Bonds: respect the barbell. Existing intermediate funds may get a tailwind when rates fall; new money can split between short duration (for near‑term liquidity) and a measured dose of intermediate to capture any remaining term premium. Avoid reaching way out the curve just to chase yesterday’s coupon.
• Annuities: stagger decisions. If you like SPIAs, consider partial purchases over 12-24 months rather than one big timestamp. Rates move, and quotes vary by carrier. You don’t need to guess the exact trough.
• Dividends aren’t bonds. Quality dividend stocks can help, but they’re still equities. Treat them as a growth and income sleeve, not a substitute for your safe paycheck.

One last practical note. When rates slide, it’s easy to chase yield in odd corners. Don’t. Credit risk is not a free lunch. Keep your paycheck engine simple: guaranteed income for needs, a bond/cash ladder for near‑term draws, and equities for long‑run inflation fight. Get that right, and a rate cut cycle becomes a nuisance, not a crisis.

Bonds 101 for a falling‑rate year: price up, income down (and duration is the lever)

Total return on bonds is dead simple on paper: yield you collect plus price change. The catch is the price piece moves with rates, and duration is your sensitivity dial. If rates drop 1 percentage point and your fund’s duration is 6, the rough math says you’re looking at about a +6% price pop. That’s the 101. The 201 is realizing the reverse is also true if cuts stall or, worse, markets price hikes back in. I’ve watched very smart people learn that the hard way. Me too, once, in a 2013 client review I still remember a little too well.

Here’s why 2025 is tricky. We’re in a falling‑rate year, so coupons on new cash are drifting lower. Income on reinvestments compresses. Meanwhile, the potential for price gains sits in duration. Extend it, you get more upside if rates keep easing; extend too far, you take more mark‑to‑market swings if the Fed pauses or inflation flares again.

• Extending duration. Longer duration benefits more when yields decline. A 10‑year Treasury will rally more than a 2‑year for the same rate move. But, and this matters, the volatility goes up. A surprise inflation print, or a “skip” from the Fed, can hand back gains in a hurry. If your sleep depends on monthly statements, don’t run the dial to 11.
• Intermediate‑term core bond funds. For retirees, these are often the sweet spot because they balance rate sensitivity and credit risk. Most sit in the 5-7 year duration range and hold high‑quality government and investment‑grade credit. You get meaningful participation if rates fall, but you’re not betting the farm on a 20‑year bond rally.
• Treasury ladders = known cash flows. A 1-5 year or 1-7 year ladder gives you dates and dollars you can plan around. As each rung matures, you reinvest at the then‑current yield. In a year like this, yes, those reinvestment yields are slipping, but your principal isn’t swinging wildly the week before you need it.
• Barbell can work when cuts are front‑loaded. Pair T‑bills (to keep near‑term risk low) with a sleeve of longer Treasuries (to capture convexity if the curve bull‑steepens). If the early cuts are steeper and the long end drifts down, that longer sleeve does the heavy lifting. If the Fed pauses, the bill side cushions you.
• Credit spreads in a soft‑landing story. When growth cools without breaking, spreads often tighten. That helps investment‑grade and even high yield on price. Just don’t overreach for yield. Lower‑quality credit is still equity‑sensitive when the cycle turns. Coupons don’t matter if downgrades and defaults eat them.

Quick math check: Price change ≈ −Duration × Yield change. If duration is 6 and the 10‑year falls 0.50%, price ≈ +3%. I’m simplifying, convexity tweaks the numbers, but it’s a decent steering wheel.

One thing I’m watching right now in Q4 2025: the curve shape. If the front end moves down faster than the long end (pretty common early in a cut cycle), barbells and intermediate cores tend to look smart. If long rates lead lower later this year, extending duration mid‑curve can still add juice. Either way, set expectations: income is rolling down with policy rates, and the “make‑up” is price. That’s fine if you can tolerate some wobble.

If this feels abstract, you’re not alone. Bonds get jargony fast. The takeaway is simple: decide where you want your risk, rate risk via duration or credit risk via lower quality, and size it so a wobbly month doesn’t force a sale. I may be oversimplifying, but the mistake I see most often is chasing one more percent of yield in shaky credit right before the music slows. Keep your core boring, use duration as a lever, and let the cut cycle work for you rather than to you.

Taxes, Social Security timing, and RMD details that actually move the needle

Here’s where rate moves meet the tax code. When cash yields drift down during a cut cycle, the pretax income line shrinks. Fine. What matters next is how much of what’s left the IRS takes. Small tweaks change the net check more than another quarter‑point of yield chasing, and I say that as someone who still geeks out over term premia charts.

Start with the easy wins: interest from bank accounts, CDs, and most taxable bonds is ordinary income in the year you receive it. It shows up on 1099‑INT/1099‑OID. Treasury interest is exempt from state and local tax, which is an underappreciated benefit if you live in, say, CA or NY. Muni bond interest is generally federal tax‑free, sometimes state‑free if in‑state, but watch for AMT items and fund distributions. The practical impact: as policy rates step down this year, your ordinary income pool may shrink, which can open a window to replace some of that income with tax moves you control.

RMDs and QCDs: SECURE 2.0 moved the Required Minimum Distribution age to 73 starting in 2023 (and it’s scheduled to reach 75 in 2033). That’s bought many retirees a few years of planning space. If you’re charitably inclined and age 70½+, Qualified Charitable Distributions (QCDs) directly from IRAs can reduce taxable income because the distribution never hits AGI. The QCD cap was $100,000 in 2023 and indexed to $105,000 in 2024 (IRS/SECURE 2.0). I expect a similar indexed figure for 2025, but check current IRS guidance. One tactical note I’ve seen help: do QCDs early in the year before taking any IRA distributions, so the 1099‑R and custodian coding align with what you actually did. Saves headaches.

Social Security timing and taxes: claiming between 62 and 70 changes both cash flow and the tax picture. Delaying after Full Retirement Age (for most folks born 1960+, that’s 67) earns about 8% annual delayed retirement credits until 70. On the tax side, up to 85% of Social Security benefits can be taxable depending on “provisional income.” Those thresholds, $25,000 single / $32,000 married filing jointly, were set decades ago and haven’t indexed, which means more people trip them each year. Coordinating claims with RMD start and Roth conversions can keep you from stacking high‑tax ordinary income on top of taxed benefits. Not glamorous, very effective.

Roth conversions and capital gain windows: lower‑rate stretches are prime time. If cash interest is tapering with cuts in Q4 and into early next year, you may have room to “fill up” lower brackets with conversions. I’m blanking on the exact 2025 long‑term capital gains thresholds as I write this, check the latest IRS table, but for reference, in 2024 the 0% LTCG rate applied up to $47,025 taxable income (single) and $94,050 (married filing jointly). Harvesting gains up to those levels resets basis without a federal tax bill. Same idea for Roth: many households aim to convert up to the top of the 12% or 22% brackets in the gap years after retirement and before RMDs and Social Security. It’s not one‑size‑fits‑all; sequence matters a lot.

I Bonds: great tool, not a magic rate‑cut hedge. I Bonds grabbed headlines when the composite rate hit 9.62% for bonds issued May-October 2022, then 6.89% for November 2022-April 2023. Those were inflation prints talking. Today, they remain inflation‑linked, which means if headline CPI cools while the Fed cuts, I Bond accruals can drift lower too. Remember the rules: $10k per person per year electronic (plus up to $5k via a tax refund in paper), 12‑month lockup, and a three‑month interest penalty if you redeem within five years. Interest is federal‑only taxed and can be deferred until redemption. Handy, but not a replacement for a ladder or a duration decision in your bond sleeve.

Rate cuts + taxes: how to stitch it together

• Map ordinary income as cash and CD yields reset. That shrinking ordinary bucket can be the opening for conversions or for realizing capital gains at 0%/15% instead of 22%+ later.
• Sequence withdrawals: taxable accounts first while capital gains rates are favorable; then IRA/401(k) once RMDs begin; keep Roth for later or for heirs. Yes, there are exceptions.
• Use QCDs to satisfy RMDs tax‑efficiently once you hit 70½ (and especially at 73+). It lowers AGI, which can reduce IRMAA Medicare surcharges two years forward. People forget that part.
• Coordinate Social Security with Roth work. Delaying benefits often creates 2-5 “gap years” to convert at low brackets before RMDs kick in.
• Mind state taxes: Treasuries dodge state tax; munis may not if out‑of‑state; Roth conversions are taxable at the state level in most places.

Quick reality check: this stuff gets complex fast. If you feel like you’re playing 3‑D chess with brackets, you’re not wrong. I still run scenarios on a spreadsheet, then change one assumption and rerun. It’s worth it.

Bottom line, with policy rates easing off last year’s highs, the after‑tax plan matters more. Lock in what the market gives you, and then sculpt the tax bill you pay on it. That combination is what keeps retirement income steady when the yield tide goes out.

Strategy menu for Q4 2025: practical moves in a falling‑rate setup

Okay, brass tacks. As the Fed eases, savings yields slip first. Will Fed rate cuts hurt savers and retirees? Short answer: only if you leave cash idle. Policy rates peaked at a 5.25%-5.50% target range in 2023-2024, and 6‑month T‑bills topped roughly 5.5% in late 2023 (Treasury data). That was the feast. Now we manage the glide path while there’s still decent carry left compared with, say, the 2010s when the 10‑year Treasury averaged about 2.4% and the FDIC national average 1‑year CD was 0.28% in 2015 and just 0.17% in 2021. Context matters.

• Refresh your cash map. Hold 6-12 months of spending needs in T‑bills or insured CDs. That’s your sleep‑at‑night bucket. Then ladder the rest out 1-5 years (monthly or quarterly rungs). If cuts keep coming, the longer rungs protect you; if cuts pause, short rungs roll quickly. I literally keep a one‑page “cash map” taped inside a cabinet door at home, spouse knows what matures when. Not fancy, just works.
• Lock what you can. Multi‑year CDs and Treasuries still look good relative to the 2010s desert. If a 3-5 year CD/Treasury locks a real yield you’re happy with, take it. Remember: rates don’t have to go to zero for this to pay; even a drift from 4‑handles to 3‑handles makes those prior locks look smart. Quick guardrail, avoid large early‑withdrawal penalties that eat the rate win.
• Rebalance toward high‑quality intermediate bonds. As policy eases, duration becomes your friend again. A move in yields can produce price gains that cash can’t. Keep it boring: Treasuries, agencies, high‑grade corporates, IG muni ladders. If your bond sleeve is still ultra‑short from 2023’s shock, tilt some into 4-7 year duration. Don’t stretch into junk to “replace” 5% cash, credit spreads don’t care about your income target.
• Shop annuities methodically. SPIA/DIA payout quotes move with rates. The spike in 2023-2024 pushed lifetime income quotes up; as rates slip, quotes ease. Get side‑by‑side quotes now vs waiting 6-12 months. For a quick benchmark: payout rates for a 65‑year‑old SPIA rose meaningfully into 2023 when short rates jumped above 5% and have been off their highs as cuts start, timing and age both matter. Compare insurers’ net payouts, liquidity riders, and state guaranty coverage. No chasing shiny riders that quietly cut the base payout.
• Refi audit. If a mortgage, HELOC, or private student loans can drop by a meaningful spread, say 75-100 bps net of fees, run the math. Closing costs, remaining term, and tax treatment decide it. HELOCs that repriced higher in 2023-2024 are candidates as rates drift lower. I’ve seen folks refinance a 7% HELOC into a fixed 5‑handle and sleep better instantly. Pencil it before you apply; don’t let teaser rates trick you.
• Dividend and buyback reality check. Don’t chase yield. Focus on coverage ratios (free cash flow and earnings vs dividends), use trends, and sector cyclicality. Energy and financials behaved one way in 2023-2024; staples and utilities another. Buyback “yields” look nice on slides, but watch total payout against earnings through a downturn. A 7% dividend that gets cut to 3% at the wrong time… that’s not income, that’s regret.

Small humility note: I still sketch this out with a pencil, mess it up, erase, and redo. Markets don’t move in straight lines. Your plan shouldn’t rely on perfect timing, either.

A few practical checkpoints: stagger maturities (no cliff risk); keep Treasuries in taxable for the state tax break; place corporates/munis where the after‑tax math wins; and revisit quarterly. If you’re still wondering whether to sit in cash, remember the data: cash maxed out when T‑bills were above 5% in 2023; the edge now migrates to quality duration. Nudge the portfolio bit by bit… and keep dry powder for opportunities that always show up when people get complacent.

The bottom line for savers: protect the income, don’t guess the Fed

You don’t need to predict rate cuts to be okay. You need to sequence cash flows so your spending is insulated while your bond and stock sleeves do their jobs on their own clocks. Here’s the simple scaffolding I’ve used with families for years (and yes, I still scratch it out on yellow paper first):

• Cash (0-2 years): park known spending in T‑bills, high‑yield savings, or short CDs. In 2023, 3‑month T‑bills hovered around 5.2%-5.5% for long stretches (Treasury auction data), which was great; if yields ease this year, that’s fine, this sleeve is for stability, not heroics.
• Bonds (3-10 years): the income engine. Use high‑quality core bonds, Treasuries, and munis (tax bracket dependent). Duration is a tool, not a fear word: a 7‑year Treasury with duration ~6.5 can gain roughly 6%-7% in price if rates drop 1 percentage point. That’s how you offset lower future coupons.
• Growth (10+ years): equities and diversified real assets for inflation beating. This sleeve funds your 2035‑2045 self. Volatile, yes; mis‑timed, often; but necessary.

Two tactics that matter when cuts show up: ladders and intent. Build ladders so maturities come due every 6-12 months, no cliff where everything rolls the same week into a lower rate. And lengthen duration in the bond sleeve on your timetable, not the market’s. Earlier this year I nudged clients from 1-2 year paper toward 5-7 year Treasuries and IG corporates, slowly, because reinvestment risk is the enemy when cash yields fade.

Blend guaranteed and market income. It’s okay to pair a Treasury/FDIC ladder with a modest single premium immediate annuity (SPIA) quote, or, if longevity is the big worry, read up on QLACs. Under SECURE 2.0, the QLAC premium limit was raised to $200,000 starting in 2023 (IRS/Treasury guidance). That’s real insurance against running out of checks in your 80s, and it can coordinate nicely with a bond ladder that carries you until those deferred payments kick in. I might be oversimplifying the interplay with RMDs and beneficiary rules, so, yes, bring your tax pro into that conversation.

On taxes, keep it a year‑round sport, not a Q4 panic. Treasuries in taxable accounts avoid state income tax in most states, munis belong where your after‑tax yield wins, and Roth conversions can be gold in a lower‑rate year. With the 2017 tax cuts scheduled to sunset after 2025, today’s 12% bracket is slated to revert to 15%, that’s the window that makes partial conversions worth modeling now, not next spring. And Medicare IRMAA matters: crossing a bracket by $1 can raise Part B and D premiums the entire year. For 2024, the first IRMAA tier started at modified AGI of $103,000 single / $206,000 joint (CMS). 2025 thresholds moved a bit higher, but the cliff behavior didn’t change, plan withdrawals and conversions with those ledges in mind.

One more reality check: you won’t time this perfectly and you don’t need to. If cash paid 5%+ in 2023 and parts of 2024, great; now the edge tilts to quality duration and smart placement. Build the segment plan, ladder it, extend a little where it makes sense, and keep a watch list for bargains when everyone gets bored again. I may be fuzzy on the exact month the first cut lands, if it’s not already behind us, but the method hasn’t changed since my first rate cycle on a trading floor: protect the next two years, own duration for the middle years, and let growth handle the long haul.

Frequently Asked Questions

Q: Should I worry about sequence risk more than average returns when planning withdrawals?

A: Short answer: yes, especially around retirement. The average return on paper doesn’t pay the bills, your sequence of returns does. If bad years land early while you’re withdrawing, the math bites faster. Practical moves: (1) hold 2-3 years of planned withdrawals in cash/very short T‑bills so you’re not selling stocks into a drawdown; (2) add a 3-7 year Treasury/CD ladder to cover another 3-5 years, that’s your income floor; (3) use a guardrail rule instead of a rigid 4%, for example, start at 4%, give yourself a 3% inflation raise most years, but if the portfolio falls 20% from a high, trim withdrawals by 10% until it recovers. That combo lowers the odds that early ugliness derails the plan. It’s not perfect, but it’s sturdy.

Q: What’s the difference between cash, CDs, Treasuries, and fixed annuities for building an income floor?

A: Think of them on a spectrum of liquidity, risk, and guarantees:

• Cash/High‑yield savings: daily liquidity, rate can drop fast when the Fed cuts. Good for 6-12 months of spending.
• CDs (bank or brokered): FDIC/NCUA insured up to limits. Lock a rate for a term; watch call features on brokered CDs. Good for 1-5 year ladders.
• Treasuries (Bills/Notes): backed by the U.S., state‑tax exempt interest. Easy to ladder 6 months to 7 years. Can sell anytime, but prices move if sold before maturity.
• Fixed annuities (MYGAs/SPIAs): MYGAs lock a multi‑year rate; tax‑deferred in taxable accounts, but less liquid (surrender charges). SPIAs convert a chunk into guaranteed lifetime income (insurer credit risk; compare state guaranty limits). Rule of thumb I use with clients: 2-3 years cash/ultra‑short, 3-7 years in a CD/Treasury ladder, optionally a small SPIA slice if you want a pension‑like check. Keep the rest in a diversified growth sleeve.

Q: Is it better to wait for higher yields or lock in now?

A: Waiting is a bet, locking is a plan. The 3‑month T‑bill spent most of 2023-2024 above 5% (FRED), and the Fed’s December 2024 projections penciled in ~75 bps of cuts for 2025. If/when cuts stick, cash rates usually reset down first. Practical approach:

• Lock a ladder across 1-5 years today to average into current term premiums.
• Keep a barbell: some cash for flexibility, some 3-5 year notes/CDs for stability.
• Refill the short rung annually from maturities, not by selling stocks in a slump. Could yields blip up again? Sure. But a ladder lets you reinvest each maturity at the new rate, no heroics required.

Q: How do I handle it if I missed those 5% CDs, what are my alternatives now?

A: You’ve got options, not just regrets:

• Build a 1-5 year Treasury/CD ladder anyway; even if top coupons are lower, the ladder diversifies reinvestment timing.
• Add MYGAs with 3-7 year terms if you’re comfortable with insurer risk and surrender periods, compare rates net of fees and check state guaranty coverage.
• Use TIPS for the 3-10 year slot if inflation protection matters; mix with nominal Treasuries to avoid overpaying for inflation.
• For near‑term cash flow, use 3-12 month T‑Bills and roll them; it’s not flashy, but it’s clean.
• If you need a higher guaranteed paycheck, price a partial SPIA at age 65+; don’t annuitize money you’ll need for big one‑off expenses. Tactical tip: set standing orders to buy at auction, watch call features on brokered CDs, and keep each bank/CU under FDIC/NCUA limits. Tax note: Treasuries are state‑tax free; MYGA interest defers in taxable accounts until withdrawal.

@article{will-fed-rate-cuts-hurt-savers-and-retirees,
    title   = {Will Fed Rate Cuts Hurt Savers and Retirees?},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/fed-cuts-savers-retirees/}
}