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The Federal Reserve Is Taking Money Out Of Your 401k/Retirement Account
It certainly sounds sinister to say that the Federal Reserve is taking money out of peoples’ retirement accounts. However, that is the reality of the situation at the moment. Whether this is immoral (i.e stealing) is beyond the scope of this post.
You have probably noticed that your retirement account (401k, Roth Ira, etc.) has been down this year. And it’s not just stocks that have gotten beaten up this year but bonds as well.
Why are assets like stocks going down? Because interest rates are going up. And why are interest rates going up? Because inflation is very high. The Fed raises interest rates when inflation picks up. In short, one reason higher interest rates are bad for stocks is that at some point there comes an opportunity cost for holding stocks because you can now get paid higher interest on cash and Treasury bonds.
