The Fed is going to disappoint you.

Fed Chair Janet Yellen and the rest of her Federal Reserve cohorts have made it clear that America’s interest rates are headed higher very soon. Like 2015 kind of soon.

But while the pundits, economists and analysts work themselves into a froth over adjusting their outlooks and portfolios, they’re all missing the big picture. It’s going to cost them — and you — when the Fed finally answers the BIG question of: To what degree can the Fed afford to raise rates?

Regardless of when the Fed begins to raise rates, the ultimate destination for U.S. interest rates is not very far from where we are today.

The U.S. has $17.6 trillion in U.S. debt and interest rates are a bullet aimed at America’s head.

Present Day:
Average annual interest rate: 1.97%
Debt: $17.6 trillion
Interest Payments for fiscal 2015 = $347 billion (or about 11% of federal budget)

What if the average interest rate across our collection of Treasury debt rose one percentage point?
Average annual interest rate: 2.97%
Debt: $17.6 trillion
Interest Payments = $523 billion (or about 17% of federal budget)

That’s 50% more than we’re paying today — and that assumes our debt does not increase, though the last time that happened was 1957.

And what happens if rates moved back to a historically normal 5% range over the next five years? Suddenly, America would have to pay nearly $1 trillion a year in interest payments — what would be roughly a third of the U.S. budget.

As a country, we are effectively sitting atop the world’s largest adjustable-rate mortgage.

I fully expect interest rates in America will remain subdued for years — out to the end of the decade, at least — simply out of desperate necessity. At most, we might — might! — be near 3% by the time 2020 rolls around.

That leaves us few choices as investors and savers seeking income. If you thought we were finally back to a world where you will find one-year bonds and CDs paying 3% to 5% … well, you have to stop dreaming about a past because that is not in our immediate future. Yellen and her Fed buddies simply can’t allow high rates to arrive.

Sure, you can own high-quality, high-yield stocks. Strong, dividend-paying security will go a long way to bolstering your portfolio.

But there’s an easier way to increase the income rolling into your portfolio and get significantly better leverage for the dollars you’re putting to work. When you sign up for The Sovereign Investor Daily, we’ll send you our free report where you can find two income-generating trading techniques explained in our How to Turn Your Brokerage Account Into an ATM report.

What’s more, by subscribing to our FREE e-letter, The Sovereign Investor Daily, you’ll ensure that your portfolio is growing even while interest rates continue to languish with our insights into excellent yield plays you may have overlooked.

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