What You Need to Know
- Retirees need to understand how rising yields affect bond holdings.
- Many annuity payouts increase in a rising rate environment.
- Variable debt holdings should be paid off as soon as possible as rates increase.
As Benz noted, higher interest rates hurt bonds: When yields go down, bond prices go up, and vice versa. “What we’ve seen this year is this downward pressure on bond prices,” she explained.
She added that short-term bond funds were down 3% to 4% through mid-May. Intermediate-term funds were down about 10%. Investors should take an audit of what bond funds they hold.