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Low rates frustrate savers

By Sheyna Steiner ·
Wednesday, May 9, 2012
Posted: 8 am ET

Savers are largely fed up with low CD rates. Last week, I published some reactions from financial service professionals to the Federal Reserve's ultra-low interest rate policies. This week, it's time to hear what savers think.

Last month, Bankrate's Financial Security Index asked Americans if low interest rates had made investing in the stock market more appealing. Though the majority said no, some people are moving into riskier investments due to low rates.

For instance, Christine Tsien Silvers, M.D., Ph.D., says she may be considering it. She writes:

I had a plan for rolling monthly CDs. When I started that a couple of years ago, they were at 2.8 percent. I continued getting a monthly CD at my bank for several months, though the rate kept falling (and my original plan of one- to two-year rolling CDs changed to five-year in order to get a better rate.)

Eventually, I had to shop around on the Internet and got CDs at other banks for a couple of months. Finally, the rates got so ridiculous (comparable almost to my then-money market savings account rate of a little over 1 percent) that I stopped getting CDs entirely. Of course, now the money market rates are lowering, too.

Next, I need to learn more about the market to get into self-management and dollar cost averaging…

Another saver, Aimee Elizabeth, author of "Poverty sucks! How to become a self-made millionaire," says she's already investing in higher-risk assets as a result of low rates. Here's what else she had to say:

I have been a saver my whole life, since I was a little girl. I remember getting 8 percent on CDs in the 1980s. I am now retired and have been since I was 38 years old. I am outraged that I am punished for being fiscally responsible, and because I saved enough to retire (like all retirees) I am now forced to invest in riskier investments because the Fed keeps the interest rates artificially low.

Borrowing may stimulate the economy, but easy credit is also what led to the housing bubble and then bust. The Fed should stay out of it. It would be best for everyone's personal economy if saving was rewarded with market dictated interest rates.

All retirees -- including myself -- could sleep much easier at night if we knew our retirement investments could all be safe and sound in FDIC-insured CDs that paid a decent interest rate.

Of course, decent CD rates can be relative as saver Koko Mouchmouchian, CEO at Korpis LLC, points out.

I've been saving money for years and didn't want to buy during the housing bubble and now got the cash in the bank looking for a house. So now I'm stuck comparing "amazing" rates, and I get excited if I see an online CD for more than 1 percent.

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