Tags: Savers | retirees | interest | rates

Savers — Particularly Retirees — Fed Up With Low Interest Rates

By    |   Thursday, 30 April 2015 07:20 AM

The Federal Reserve has kept its federal funds rate at a record low of zero to 0.25 percent since December 2008, making a mockery of savers' attempts to earn decent income through savings accounts, CDs, money-market accounts and bonds.

The impact is particularly severe on those in or near retirement, who are dependent on income from their investments.

"We're frustrated," Steve Raatz, a 59-year-old Dallas resident, tells The Wall Street Journal, speaking of himself and his wife. "CDs and Treasurys, we don't even look at those anymore because the rates are so low they're ridiculous."

The highest 1-year CD rate listed on Bankrate.com Wednesday morning was 1.23 percent at Synchrony Bank. And the 5-year Treasury yielded just 1.44 percent. Many money-market funds yield only 0.01 percent.

"We're in this pickle," Chad Carlson, director of research at Balasa Dinverno Foltz, a wealth-management firm in Itasca, Ill., tells The Journal. "You need to get more than 2 percent return for retirees. Even with inflation lower right now, you're basically treading water."

Consumer prices declined 0.1 percent in the 12 months through March.

Elsewhere on the retirement front, if you think many full-time employees are ill-prepared for retirement — as a slew of studies indicates they are — imagine what it's like for the 34 percent (and growing) of the American workforce that are freelancers.

"I'm going to have to work until I drop dead," Tom Egan, a graphic designer in his 50s living in Jersey City, N.J., tells CNBC. "I'm way behind in retirement savings."

The problem for freelancers, of course, is that their income stream is irregular, and they don't have employers that will match contributions to a 401(k) plan.

Nathan Schreiber, a 30-something Brooklyn-based illustrator and owner of a startup children's education service, puts the situation in dire terms.

"I'm woefully unprepared for retirement and terrified about it," he tells CNBC. "When I do get a good job, I make a point of saving it."

Technology makes getting more assignments difficult, he says.

"I live frugally, have no debt and have some savings, but things are still tenuous. I think there's going to be a crisis for my generation. Nobody's saving enough, and everybody's living longer. There's a brewing financial apocalypse."

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The Federal Reserve has kept its federal funds rate at a record low of zero to 0.25 percent since December 2008, making a mockery of savers' attempts to earn decent income through savings accounts, CDs, money-market accounts and bonds.
Savers, retirees, interest, rates
371
2015-20-30
Thursday, 30 April 2015 07:20 AM
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