The Future of Federal Funds Rate and the Impact on Your Savings - YouTube

Welcome back,  

everybody. Guess who's back. Bruce Porter  joins us now with this week's Dollars and  

ense from the Resource Center. Of  course. Thank you for coming in.

Hey, glad to be here.

Good to have you.  

As always. Now, we want to dive into our topic  here in just a second. First of all, though,  

you're calling it Planning Made Simple  workshop. Tell me about the workshop.

Yeah, it's our estate  

planning series we're still doing. We  have a lot of demand for it. So we have  

one tonight at six. And I think it's full.  And tomorrow was full. But we do have the  

same workshops coming up in February. We  have those scheduled several months out.

So if you're interested, bring  your family. You want to sit down  

and get some basics about estate planning. This is  our tagline for the year - Planning Made Simple.  

We try to make it simple, where it's  easy to understand. And then you can  

take that information and you can  make decisions on how to move forward.

Yeah. And I think taking the first step is  

sometimes the hardest part to do. And it's really  not that hard. You just got to start somewhere.

It really is. We try to  

take all the anxiety away and give  you a direction. And it does help.

Set us on the right path. Today, we're  

going to talk about CD rates. Now with interest  rates the way they are right now, sometimes  

people are saying - "people still do CDs?"  But yes, of course they do. Tell me about it.

Well, they do. I mean, you know, the  

fed funds rate is used and that's the internal,  we won't dive into a lot of detail on that. But  

the feds fund rate dictates prevailing interest  on a lot of different things - credit card rates,  

car loan rates, mortgage rates, things  like that. And then effectively,  

it dictates funds available to the public for  savings and long term savings, things like that.

You know, when the rates are low, what does it  do? It boosts the economic impact. When rates  

are high, it puts the brakes on. So right now the  feds have said the fed funds rate is going to stay  

pretty much the same for the next three years, all  the way through 2023. So, we can expect interest  

rates to stay low to continue to boost the economy  for the next, what, two years now? Two more years.

So now how does that affect you as a consumer?  Well, if you're setting, let's just talk basics.  

If we've got some money in the bank in savings,  and maybe we're retired, maybe we're not,  

this is going to apply to everybody. I tried  to get as close as I could on what the best  

bank rates were. So if you look at a .75% bank  rate, and that's a pretty good rate right now.  

Like, for a two year term with $1,000 minimum,  that's $750 per year per $100,000. So if  

you've got 10,000, that would be $75. If  you've got $1000, it'd be $7.50 per year.

So not a huge return, but it's very safe.

It's very safe. And  

that's why people have their money in a  bank savings type plan. It's because FDIC,  

and it's safe, and it's secure and things  like that. Well, a bank calls that product,  

a certificate of deposit. An insurance company  calls the same similar product, a fixed annuity.

So when you look at a fixed annuity compared  to a fixed bank CD, here's an example.  

Current rate of 2.4%. There's several  companies that have this. A three year term,  

so a little bit longer term. But again, if your  objective is interest earnings on that money,  

you can pull it out or you can leave it in. It's  higher, per $1000. It's higher per $100,000.  

You look at $2400 per year per $100,000 versus  $750 per 100. Yeah, so that'd be $240 per year per  

10,000 or $24 per year per per $1000.  And so it's three times what the rate is.

Which I think  

begs the question here, what on earth is the  difference that would make me say, "well,  

why would I do this when I could do that?" But  there are so many other things to figure out.

They're both guaranteed.  

They're both safe and secure. CDs are  taxable, whether you use the interest  

or leave it in there. Annuities are deferred.  So there's some differences. But the main thing  

is - are they safe? Are they secure? Bank  accounts are secure. What's the objective  

of cash? That emergency reserve. If you've  got too much cash, you're sacrificing rate,  

then part of your cash might be more suited in a  longer term, like 2.4% fixed annuity might be an  

option for long term accounts. But you still  need to maintain cash reserves in the bank.

Okay, yes, you do. Get some  

expert advice. You've got your book, of course.  Talk real quick about where people find your book.

Finding the courage  

to retire. You can call the office  882-1800. We got copies there. Or  

you can go on Amazon, and order it on there.  But I cover a lot of these topics in my book.

He does. It's a very,  

very good book full of good information.  If you have a question for Bruce Porter,  

visit his website resourcecenterinc.com or  give him a call 417-882-1800. Good to see you.

Be glad to help. See you next week.

See you next time.