How low interest rates hurt seniors
Returns from bonds and other safer investments have plummeted. That's pushing seniors and savers into the riskier stock market.
Forbes argues that seniors in particular will suffer as the Federal Reserve keeps interest rates low, increases the money supply and leads us into an inflationary environment. "By holding interest rates at or near zero for so long, the Fed has been forcing seniors to switch to riskier investments like stocks and mutual funds just to maintain their standards of living," write Antony Davies and James Harrigan.
Seniors generally tend to rely on safer investments, such as savings accounts, certificates of deposit and U.S. savings bonds. Those have lower returns than stocks in many cases, but they were considered a safe way to preserve capital for the Golden Years.
But it's hard to find any decent returns in those safer investments. A 1-year CD gives a measly return of 1%; a savings account is even worse. Savings-bond rates are in the basement.
This has triggered a broad shift in seniors' investing strategies. The median senior cut his savings bond investments by an average of 11% a year from 1998 to 2010, Forbes reports. At the same time, he upped his investments in stocks and mutual funds by nearly 8% a year.
That's risky behavior from a cash-preservation standpoint. But what choice do seniors have at this point? "Our seniors have become the canaries in the coal mine," write Davies and Harrigan. "If we don’t stop runaway debt, Uncle Sam’s war on seniors will soon spread to become a war on all taxpayers."
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The article dead on. I would have never gone into the stock market if I could still earn anything with CDs. The last time we renewed our IRAs we got 4 1/4% for 59 months & I thought that was bad. Now I am quite happy getting that but I sure hope it gets better by the next time we have to renew.
Outside of that I have been having to go into things I would never have considered before. I remember when all banks paid 2% & all Savings & Loans paid 2 1/2% & I never dreamed rates could ever go below that.
It makes no sense. With the government going so massively in debt the interest rates should be sky high. Can you imagine what will happen to the national debt when that happens? Every dime in taxes will be eaten up by just the interest on the debt.
And we are being told to save money, to invest. If I had time to do it all over again my money would be in the mattress,
don't laugh, it might less, but all mine......
Of course lowering interest rates hurt seniors. They have no business being in the stock market, especially these days when it is so manipulated even the big boys are getting scared. But the Fed has made the stock market the only game in town. Plus by increasing the money supply they are screwing savers and rewarding the speculators who put us here to begin with. Just to stay even, seniors have to be in riskier investments than they should be. It stinks.
The fact is, we are a hair from falling into a deflationary spiral and the fed is pumping as fast as they can to keep things up. It worked initially as the early QEs flowed into the market but the law of diminishing returns is kicking in. The latter QEs are sitting in the banks and not entering the system. No one wants to lend or borrow right now because of all the uncertainty. Very scary times.
Then we come out with Obama this and Obama that, blah,blah,blah.
Who do you think sets the rates....?
What does your bank give you....?
What does your C.U. give you...?
Do you think they all wait for a call from Obama or Bernanke....And then change their Rates ??
If you ask those places you may get a little better rate, or use YOUR LEVERAGE..
And then threaten to go someplace else....THEN FOLLOW THROUGH..
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