Money Market Yields Are Falling: What Retirees Should Do Before the Next Fed Cut

This episode explains why money market and cash yields have dropped from near 5% to around 3% as the Fed has cut rates since September 2024, creating challenges for retirees who planned around “safe” high-yield cash. Leibel Sternbach breaks down the Fed’s mandate and tools, how the overnight rate influences money supply, inflation, employment, and risk-taking, and why banks have reduced savings rates faster than the Fed. He suggests considering short-term government treasuries or funds like BIL to get yields closer to prevailing rates and cautions against locking into longer CDs as rates fall. The discussion covers how bond prices move opposite interest rates, why the bond market has been volatile, and how bond ladders can reduce reinvestment risk while adding duration-driven price swings. The episode closes with a framework for balancing cash, CDs/treasuries maturing over five years, and bond allocations based on actual income needs.

00:00 Cash Yields Are Falling

00:40 Why The Fed Cuts Rates

02:00 Money Supply Tug Of War

05:06 Where Rates Head Next

05:58 Better Than Bank Savings

06:45 Bond Prices Explained

07:55 Bond Market Volatility

09:44 Bond Ladder Pros And Cons

11:55 Managing Duration Risk

12:54 Wrap Up And Next Steps