The Eckler Ltd. July 2024 Capital Accumulation Plan Income Tracker (CAPit) examining the impact of rates cuts on retirees and near retirees, warns that interest rate cuts could present a challenge to those retirees and pre retirees without suitable housing lined up. Retiree and pre-retiree clients alike, may also need to adapt their financial plans and investment strategies, they warn.
“Interest rate cuts have a multifaceted impact on the economy and will affect each plan member differently, depending on the type of debt they have and their sources of income or investments,” the actuarial consulting firm states in its July report. “For retirees or near retirees, lower interest rates can translate into lower interest payments on existing debts such as mortgages, personal loans, or lines of credit. As such, they may find it easier to manage their debt obligations and add to their retirement savings with the increased cash flow.”
They observe that lower mortgage rates are also an opportunity for those looking to downsize, relocate and access home equity lines of credit. They also note, however, that lower rates may also contribute to higher home prices, which could present a challenge for those who do not already have suitable housing lined up.
“The impact of interest rate cuts on retirees and those nearing retirement is nuanced and dependent on each person’s specific financial situation. The potential benefits of debt reduction and housing affordability are often balanced against the challenges related to lower bond yields and investment outcomes. Retirees and pre retirees alike may need to adapt their financial plans and investment strategies,” they conclude.
