More Rate Cuts Are Coming

How to Balance Growth and Income in Your Retirement Plan

Welcome to LegacyHaven Advisors’ latest insights, with the Federal Reserve poised to cut rates this week on October 29th, and another likely cut in December, it’s time to understand what this means for your portfolio. Rate cuts are bullish for risk assets, but they pose challenges for fixed-income strategies. Let’s explore why and how to position your retirement plan for success.

Why Rate Cuts Fuel Risk Assets

When the Fed lowers interest rates, borrowing becomes cheaper. Banks, institutions, and hedge funds can borrow at, say, 3% and invest in assets yielding 10%, pocketing the 7% spread. Essentially, they get paid to borrow, making risk assets like crypto, small-cap stocks, commodities, and growth-oriented tech more attractive. This dynamic is a big reason why markets have rallied recently, with the S&P 500 sitting at new all time highs at the time of writing.

Contrast this with 2022, when rising rates made borrowing costlier. Higher rates forced institutions to seek greater returns to justify the risk, shifting focus to fixed-income assets yielding 4–6%. Now, with rate cuts beginning last year, and picking up again this year, risk assets have been back in favor, adding fuel to portfolios with exposure to growth.

Key Takeaway: Lower rates boost risk assets by reducing borrowing costs, creating opportunities in crypto, small caps, and tech. Conservative investors can benefit by participating in this growth while preparing for volatility.

Fixed-Income Assets and Rate Cuts

While rate cuts are great for risk assets, they reduce yields on new issuances of fixed-income products like bonds, MYGAs, and CDs. If you hold fixed-income assets maturing in the next 1–3 years, reinvesting at lower rates will shrink your income stream. For retirees relying on predictable payments to cover essentials, this is a critical moment to act. Multi year guaranteed annuities (MYGA's) currently paying 5–5.9% for 2–10-year terms offer a chance to lock in higher rates before they decline further.

Action Step: Use our Retirement Income Calculator to assess how fixed interest can benefit your retirement income. If your CDs or bonds are nearing maturity, schedule a free consultation to explore locking in higher rates now.

Balancing Growth and Stability

The Fed’s expected 25-basis-point cut this week, with another likely in December, will continue to drive risk assets higher. We also forecast a cooler CPI report next month, which could further encourage rate cuts, adding momentum to markets. However, growth isn’t linear, markets will have ups and downs. When volatility hits, guaranteed income from fixed assets ensures you don’t worry about paying your mortgage or other living expenses.

What’s Next? With GDP rising, inflation accelerating, and earnings growth strong, risk assets are poised for more gains. But volatility is inevitable, and lower yields on new fixed-income products could impact retirees. Now’s the time to balance growth opportunities with guaranteed income to ensure your retirement thrives.

Are your fixed-income assets maturing soon? Fill out our form below to lock in higher rates and build a balanced retirement plan.

For retirement portfolios, rate cuts offer growth potential but require careful planning.

At LegacyHaven Advisors, we help you:

• Secure Income: So you can be confident no matter how the market is performing.

• Protect Wealth: So that you never run out of money in retirement.

• Thrive in Any Economy: By forecasting economic conditions and positioning accordingly.

Don’t let the allure of growth distract you from the risk within your conservative assets. Try our Sequence of Returns Calculator to test your portfolio’s resilience.