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.

By Kim Peterson Dec 14, 2012 12:30PM
Image: Couple paying bills ( Corbis)Low interest rates stimulate the economy by persuading people to spend and invest. Unfortunately, those rates are also pushing senior citizens and savers into the risky 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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Dec 14, 2012 5:12PM

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. 



Dec 14, 2012 4:55PM
Where the hell has this story been.  They are stealing billion from little people to make the rich richer.
Dec 14, 2012 4:43PM
The low interest rates are hurting everyone. For everyone who doesn't retire due to low rates, there are  job opening(s) gone AWOL. These jobs could go to entry level people who would by a house, car or start a family which would stimulate the economy more than a grandparent. Interest rates are far to low for this point of the recovery.
Dec 14, 2012 4:43PM
Our mixed race President  thinks Seniors cost the govt too much money.  Just wait he will limit care to Seniors the first chance he gets.  He wants that committee to decide the care Seniors will get. The older we are the less care we will get.
Dec 14, 2012 4:39PM
our very own government deceit, lies, mislead americans by making laws to transfer wealth from the working class to their 'greater cause'
Dec 14, 2012 4:30PM
WAKE UP AMERICA! The FED's don't want us to have anything, how can they have a SOCIALIST SOCIETY if we have money that we can invest. This is what the people voted for in this and past election. They think GOVERNMENT should take care of us. GET A LIFE, and start taking care of yourselves. DON'T DEPEND ON THIS GOV. THERE MORE INTERESTED IN TAKING CARE OF THEMSELVES., and using our money to do it.
Dec 14, 2012 4:01PM
be very careful with reverse mortgages as the fees each month are very high. my reverse mortgage now charges almost $200 a month just in fees to have this mortgage.  It can eat up your mortgage money really fast.... I lost $53,000 in a mutual fund in 2008 thanks to gwbush presidency. mutual funds are risky careful   SENIORS
Dec 14, 2012 3:49PM
IT's a concerted effort to go get the conservative investments that people replied on  for retirement.  They already got the higher risk 401k investers, so now they want all the low risk money tied up in bonds!  The Fed is a front for the private global banking criminals!  Wake up people.  They got the initial high and moderate 401k wealth and home equity with their first attack (engineering the Wall Street crash) they convinced the US government to give them the money they loast and then they bought up all the people getting out of the market.  So now it's on to the next assault of trying to get all that money tied up in bonds!  And guess what...they will get most of it.
Dec 14, 2012 3:48PM
You would think the AARP would be up in arms over all this, but I guess they are more concerned with not retesting Florida drivers after they reach 80. There are other, less obvious ramifications.  One is that seniors who might have retired are hanging onto their jobs.  Of course they can't be pastured out solely  because of their age, because the US Government says that's age discrimination.  So the "exit" end of the workforce pipe is clogged up with seniors hanging in there.  And the consequence is that there are far fewer jobs at the entry level, as was the case when people aged, retired, and somebody younger in the system moved up the ladder creating guess what???? Entry level jobs.   
Dec 14, 2012 3:47PM
Why should the banks care?  If the banks are literally being "given" money by the Fed, their borrowing costs are minimal.  Furthermore, what they lose with fewer loans, they make up for with higher fees on the bank customer.   
Dec 14, 2012 3:43PM
The United States federal government is NOT here to help the seniors.  They are not here to help the workers.  The UNITED STATES federal government is here to take what you have for themselves so they can have high salaries for part time jobs, better healthcare and better pensions for themselves.  And, we are the dumbashes that keep putting them back in office.  They can't add and subtract and have us in debt so bad we'll probably never recover but I can assure you they have laws to protect them from incompetenices.  I am ashamed to be called American now.
Dec 14, 2012 3:39PM

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......

Dec 14, 2012 3:37PM
Dec 14, 2012 3:33PM

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.

Dec 14, 2012 3:27PM
I only object to your entry line, "How the Fed hurts seniors."  Low interest rates from the Fed is supposed to provide banks with funds for lending to stimulate the economy.  The only economy the banks stimulate is their own greed.  Companies sit on billions, don't hire, don't invest and don't pay dividends.  Banks sit on billions, don't loan and don't pay interest for savings accounts or CD's.  You don't have to look hard or read much to see who's making and sitting on huge amounts of money.  But it's the Fed that's hurting seniors?
Dec 14, 2012 3:21PM

The consequences of government meddling; The government has artificially set interest rates paid to savers way below market. Then shouldn’t savers be reimbursed for their loss by the government? Likewise, the government has set house prices above market. Then shouldn’t house buyers be reimbursed for their loss by the government?

Dec 14, 2012 3:17PM
Bernanke doesn't give flying **** about seniors or anybody else except his rich banking buddies.
Dec 14, 2012 1:29PM
In all likelihood, they didn't have enough in stocks to begin with. If they had had a reasonable balance, there's no way they would have been getting just 1% over the last year.
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