federal reserve

6 ways the Federal Reserve and its low interest rates are hurting retirees

Retirement »

No. 1: Paltry returns on savings
No. 1: Paltry returns on savings © Diego Cervo/Shutterstock.com

No. 1: Paltry returns on savings

In June 2006, the federal funds rate, the key interest rate that the Fed controls, stood at 5.25 percent. In September 2007, central bankers began lowering the federal funds rate and continued to do so until it fell to a range of between zero percent and 0.25 percent in December 2008. It remains there today.

Rates on certificates of deposit, money market accounts and savings have plunged in tandem.

The result has been devastating for retirees counting on safe, fixed returns, says Michael Rubin, founder of Total Candor, a financial planning education firm based in Portsmouth, New Hampshire.

"They're earning a lot less on their savings than any other time in recent history," says Rubin, author of "Beyond Paycheck to Paycheck."

However, even getting a sad-sack 1 percent return is better than exposing all your savings to higher risk, says Alan Moore, founder of Serenity Financial Consulting in Milwaukee.

"I look at cash as market insurance," he says. "When the stock market takes a dive, (retirees) don't want to be in the position of having to sell stocks to fund their lifestyle."

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement

Blog

Crissinda Ponder

New home sales move upward

Sales of new single-family homes are up more than 5% from June 2015 and more than 25% from July 2014, according to new data from the federal government.  ... Read more

advertisement
Partner Center
advertisement

Connect with us