Fed Up? Here's How the Central Bank Just Changed Your Retirement Plans

The Federal Reserve is not only keeping interest rates steady for the time being, but the Fed's projected interest rate movement schedule now shows lower rates than previously expected. 

The Fed is keeping its benchmark lending rate at a range between 2.25% and 2.5%, and the average Fed board member now sees rates remaining further from 3.5%. 

What does this mean for retirement investors?

Finding new income assets in which to reinvest interest income with a low risk of losing capital will now be harder. "Investors, for the rest of their lives, are unlikely to be reinvesting money into higher yielding short term rates or long rates," said Brian Levitt, senior investment strategist at Oppenheimer Funds. "You're going to have to source income from other places." 

Levitt suggests looking at high yield bonds, which can often be correlated wit the stock market, the senior loan market, which is less risky, international non-U.S. dollar investments, among others. "Investors are going to have to be creative to find other ways to generate income within the risk parameters that they've set for themselves," Levitt said. 

Related. There's a Historic Shift Going on at the Fed

Clearly, the Fed is not projecting high inflation, but risk-free treasuries still have pretty low yields, so finding higher yield elsewhere may be worth a look.

The really good news? "The Fed is now going to be on hold for the next couple of years, and I view that as a positive sign for risk assets, Levitt said. When spreads between yields of risk free assets and riskier assets increase, investors become more willing to take the risk of holding the higher yielding asset. Plus, lower rates put less pressure on borrowers' ability to repay debt. 

Related. 2019 Is the Year of the Debt Diet 

How Much Money Will I Need to Retire?

Want to learn about retirement planning from some of the nation's top experts? Join TheStreet's Robert "Mr. Retirement" Powell live in New York on April 6 for our Retirement Strategies Symposium. For a limited time, tickets are available for this full-day event. Check out the agenda, learn about the speakers and sign up here.