What Higher Interest Rates Mean for Retirement Income Cash Flows

Balanced portfolios now generate more income, but should you spend it or reinvest? [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=53273&elqTrackId=2e3bfe008bfe40aa907b231b945673ec&elq=4889b0fe477a4ec8a670ee1232902a4b&elqaid=53273&elqat=1&elqCampaignId=26994) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] Retirement planning has undergone a seismic shift over the past few years because of a single factor: higher interest rates. I’ve been taking stock of the implications of higher yields for retirement planning and portfolios, including [safe withdrawal rates and asset allocation]( [Social Security claiming, annuities, and long-term-care insurance]( and [mortgage paydown](. This week, I took [a closer look at the implications for retirement cash flows](. Thanks to higher interest rates, the organically generated yields on [my retirement Bucket portfolios]( are now close to 4%. But are retirees better off spending that income or reinvesting it back into their portfolios? I discussed the pros and cons of various strategies for creating in-retirement cash flows in this week’s column. Bond index funds have been slower to take off in popularity than equity index funds, and some investors naturally have reservations about how capitalization-weighting a portfolio inherently puts the most assets behind the most indebted borrowers. In the US, for example, bond index funds have the biggest positions in bonds issued by the US government. As it turns out, however, [US government bonds have historically been terrific ballast for equities]( a consistent finding in [our annual research about diversification and correlations](. In his latest installment in a series, John Rekenthaler took a closer look at [the best bond index funds](. (In previous columns, John has cast his gaze on the best [US equity]( and [international equity index funds]( Your index fund isn’t going to call you in the middle of the night with a plumbing problem, which is why I appreciated [Amy Arnott’s sober, skeptical look at investing in physical real estate](. Buying properties is often depicted as a surefire ticket to wealth, and I’ve definitely known quite a few people who have gotten rich in this fashion. But it’s not for everyone, and the risks too often seem to get glossed over. Amy didn’t do that. Finally, I’ve been toiling behind the scenes on a forthcoming book called [How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement](. And it’s finally done! I’ve been my own worst critic since childhood, but even I’ll admit that I’m happy with the finished product. It’s coming out on Sept. 17 but is available for preorder now. Fingers crossed that you’ll like it. With warm regards, Christine Benz [How Rising Interest Rates Affect Your Retirement Plan]( Be aware of implications for returns, withdrawal rates, and asset allocation. [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [3 Key Retirement Decisions Affected By Higher Yields]( How to factor in higher rates when deciding whether to purchase an annuity or buy long-term-care insurance. [Read More]( [Pay Off Your Mortgage Early or Invest?]( Higher safe yields in 2024 upend the old rules related to mortgage paydown. [Read More]( [What Higher Interest Rates Mean for Retirement Cash Flows]( Now that interest rates are higher, should retirees try to live off of their portfolios’ yields? [Read More]( [3 Risks Higher Interest Rates Pose to Your Retirement Plan]( How to avoid the pitfalls. [Read More]( [Our Best Investment Portfolio Examples for Savers and Retirees]( This series of portfolios from Morningstar's director of personal finance Christine Benz can help investors reach their financial goals. [Read More]( [Which Bonds Provide the Biggest Diversification Benefit?]( The bond rout in 2022 upended notions about correlations, but high-quality bonds and cash have been solid diversifiers over longer stretches. [Read More]( [How Did Diversified Portfolios Hold Up in 2023]( Delve into Morningstar's 2023 analysis of portfolio diversification strategies. Uncover insights on correlation trends, asset class performance, and what it all means for building diversified portfolios. [Read More]( [Which Bonds Provide the Biggest Diversification Benefit?]( The bond rout in 2022 upended notions about correlations, but high-quality bonds and cash have been solid diversifiers over longer stretches. [Read More]( [The Best Bond Index Funds: Part 1]( Intermediate core, short-term, and ultrashort funds. [Read More]( [The Best US Stock Index Funds]( Their prices are very much right. [Read More]( [The Best International Stock Index Funds]( Excellent choices abound in five investment categories. [Read More]( [4 Reasons Not to Buy Into the Real Estate Hype]( Buying bricks and mortar isn’t a guaranteed path to wealth. [Read More]( Get Top Stock Picks and Market Insights Every Week on The Morning Filter. Every Monday morning, Susan Dziubinski sits down with Morningstar Chief U.S. markets strategist Dave Sekera to discuss what's on his radar, new Morningstar research, and stock picks or pans for the week ahead. [Watch Now.](morningstar/streams?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=53273) Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2024 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602