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Low interest rates at the same time baby boomers are retiring

Texashiker

Lifer
Dec 18, 2010
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Does anyone find it odd that we have historic low interest rates at the same time baby boomers are retiring?

So what if the banks are paying low interest rates?

http://www.usatoday.com/news/opinion/forum/story/2012-08-29/seniors-obama-republicans-media/57410976/1

Some years ago, when earning say 5% on your money was realistic, a $360,000 portfolio of CDs would produce $18,000 a year in interest — that's $1500 a month. Couple that with an unexceptional Social Security payment of about the same amount, and that's $36,000 a year, $3,000 a month. Nothing fancy, but enough to get by.

Now change that 5% to 0.9% and you're earning $3,240 per year, or about $270 a month. Add that to $1,500 a month in Social Security and you've got $1,770 a month to live on; just $21,240 a year. That's a brutal 41% cut in income. And it is why many senior citizens around the country are being forced to draw down savings to make ends meet.
Seniors that depend on interest payments from their savings are being hammered by low interest rates.

How much money are the banks saving by not having to pay good rates of return on savings?

In other words, you save for decades to have a nice retirement, then the banks strangle the return through low interest rates.
 

EagleKeeper

Discussion Club Moderator<br>Elite Member
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Oct 30, 2000
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And what are the low rates doing for the rest of the economy?

Seniors were told like others to divest; not have everything in one basket.
 

Double Trouble

Elite Member
Oct 9, 1999
9,273
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Does anyone find it odd that we have historic low interest rates at the same time baby boomers are retiring?

So what if the banks are paying low interest rates?

http://www.usatoday.com/news/opinion/forum/story/2012-08-29/seniors-obama-republicans-media/57410976/1



Seniors that depend on interest payments from their savings are being hammered by low interest rates.

How much money are the banks saving by not having to pay good rates of return on savings?

In other words, you save for decades to have a nice retirement, then the banks strangle the return through low interest rates.
Financial services firms (including banks) make more money when interest rates are higher. I don't see anything "odd" about low interest rates. In fact, the low interest rates are putting a big squeeze on financial service firms and banks.

Anyone who counts on the interest rate to fund a big part of their retirement income is in deep trouble anyway. Unless you have some sort of defined benefit retirement package, you'd better have a defined contribution plan like a 401k or have an annuity to fund your retirement.
 

Smoblikat

Diamond Member
Nov 19, 2011
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They should get a job if they cant afford life, just like the rest of us. They offer nothing yet take up everything, this might seem cruel but its true. We would be better off without them draining our system, we need major reforms to make it easier for people to retire at a desirable age AND still be self sufficient. Please dont twist my post into saying im for euthanasia of the old, all I want is reasonable reform that doesnt mean I have to pay for someone to sit on their dying ass all day.
 

Rainsford

Lifer
Apr 25, 2001
17,515
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They should get a job if they cant afford life, just like the rest of us. They offer nothing yet take up everything, this might seem cruel but its true. We would be better off without them draining our system, we need major reforms to make it easier for people to retire at a desirable age AND still be self sufficient. Please dont twist my post into saying im for euthanasia of the old, all I want is reasonable reform that doesnt mean I have to pay for someone to sit on their dying ass all day.
You understand that we're talking about people who had a retirement plan and saw it get wrecked by things totally out of their control, right? The whole "get a job, hippy" vibe you've got going on doesn't quite seem to apply here...
 

Texashiker

Lifer
Dec 18, 2010
18,811
192
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They should get a job if they cant afford life, just like the rest of us. They offer nothing yet take up everything, this might seem cruel but its true.
Your day is coming.

Why should we have to work our lives away? I have been working for 28 years, since I got my first job at a grocery store in 1984.

The people in the OP have worked their life away and are ready to retire.

It seems that no matter what people do, they lose money. Historically, savings accounts have been the safest form of investment. You are almost guaranteed a return. But not as much of a return as more risky investment plans.

Its like no matter what people do, the only ones that come out on top are the banks.
 
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Charles Kozierok

Elite Member
May 14, 2012
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Why should we have to work our lives away?
Because that is the nature of life. You work to survive. If you are able to work enough when younger so you can work less when older, great. But nowhere is it written that anyone is "entitled" to any sort of "retirement" -- much less 20 or 30 or 40 years living off of others' labor.
 

mshan

Diamond Member
Nov 16, 2004
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Silver Collar economy:
"Vita Needle is an extreme example, but it's just one of many employers who in varying ways have been learning to value workers on the mature end of the spectrum.

The rise of the older worker is cast sometimes as a problematic feature of the current job climate: a "gray ceiling" in which the lingering of older employees leaves scant opportunity for younger workers to be hired, developed, and promoted. The challenge is genuine, as recent headlines about a "lost" generation of youth imply."


http://www.cnbc.com/id/48884817

Baby boomers approaching retirement shouldn't be in 100% cash equivalents anyways. Maybe 50 / 50 stock bonds with small cash cushion or something like that.

Plus bond funds have done quite well because Bernanke's financial repression (http://performance.morningstar.com/fund/performance-return.action?t=VBMFX&region=USA&culture=en-US).

It is when economy really starts to pick up and interest rates start moving to more normal levels when people who have chased performance and piled into bond funds may realize you can lose money in bonds too.

Your savings account might not lose money in terms of face value, but you are most likely not keeping up with inflation, so in effect losing purchasing power over time.
 
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Vdubchaos

Lifer
Nov 11, 2009
10,413
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They should get a job if they cant afford life, just like the rest of us. They offer nothing yet take up everything, this might seem cruel but its true.
You can apply the same sort of thinking to children.

Why did YOU take up space, contributed NOTHING and ate/shitted your first 18 years of your life???

:cool:
 

mshan

Diamond Member
Nov 16, 2004
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Your anger should be directed at George Nero Bush.

Inflation peaking at 5.6% (July 2008) and oil (Brent, not WTI?) at $147 around same time (gas approaching $5?), then crashing stock market and economy into near Depression.

Don't you even remember how President-elect Obama had to step in and start making speeches to assure Wall Street that adult supervision would be in place in January.

Dubya quietly slithered away, probably being told not to interfere with smooth transition of power to Obama.
 
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Exterous

Super Moderator
Jun 20, 2006
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Does anyone find it odd that we have historic low interest rates at the same time baby boomers are retiring?
What I find odd is how much we ignore retirement savings. I find it much more concerning that the article you posted could - at most - apply to 25% of retirees. Why only 25%? Becasue only about 25% of people approaching retirement have more than $30,000 in their retirement accounts.

http://www.economicpolicyresearch.org/guaranteeing-retirement-income/528-retirement-account-balances-by-income-even-the-highest-earners-dont-have-enough.html

Now - for those that it does apply for I would be greatly concerned that they are depending solely on CDs for their income. Why would you put all risk in a single asset when that asset very clearly tells you the returns will be so low?

Furthermore - it appears that somewhere along the line investments that do traditionally do well with low interest rates were ignored. (Bonds, REITS, mREITS). This is why diversification is so important (And don't go pilling all in to Bonds, REITS either because when interest rates rise those will not be nearly as strong)
 
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glenn1

Lifer
Sep 6, 2000
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Low interest rates at the same time baby boomers are retiring.
I don't give a fuck about boomers. They ones who prepared will do fine, the ones who didn't will suffer and vote Democrat like those hoping for a handout always have. Only this time they're going to realize the country doesn't have the money left to allow the Freebie Party to lavish money on them like they have favored groups in times past.
 

nobodyknows

Diamond Member
Sep 28, 2008
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And what are the low rates doing for the rest of the economy?

Seniors were told like others to divest; not have everything in one basket.
Cash is the safest basket out there, and if your retirement age safety is a GOOD thing.
 

nobodyknows

Diamond Member
Sep 28, 2008
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I don't give a fuck about boomers. They ones who prepared will do fine, the ones who didn't will suffer and vote Democrat like those hoping for a handout always have. Only this time they're going to realize the country doesn't have the money left to allow the Freebie Party to lavish money on them like they have favored groups in times past.
What does that outburst have to do with low interest rates? DUHHHHHH!!
 

Exterous

Super Moderator
Jun 20, 2006
19,275
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You understand that we're talking about people who had a retirement plan and saw it get wrecked by things totally out of their control, right? The whole "get a job, hippy" vibe you've got going on doesn't quite seem to apply here...
Aside from pensions what else are you referring to?
 

Texashiker

Lifer
Dec 18, 2010
18,811
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I don't give a fuck about boomers. They ones who prepared will do fine, the ones who didn't will suffer
I think you are missing the whole point, the linked article in the opening post is about people who have a nice nest egg.

I find it odd that banks are paying historically low interest rates at a time when baby boomers are retiring.

From the looks of things, financial advisers are going to tell boomers to move their money from savings to something like a bond market. Then in a couple of years the bond market is going to crash. Which will then wipe out the life savings of millions of people.
 

Exterous

Super Moderator
Jun 20, 2006
19,275
2,100
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Cash is the safest basket out there, and if your retirement age safety is a GOOD thing.
And, in return, you will often see negative or very tiny growth rates in regards to inflation. Depending on how long you live and how much you have saved it is very likely cash only will not be enough to sustain yourself through retirement.
 

glenn1

Lifer
Sep 6, 2000
25,383
1,013
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What does that outburst have to do with low interest rates? DUHHHHHH!!
Because I have different financial objectives than Boomers low interest rates don't bother me. Heck, since I'm in the accumulation phase of my life, rates being low actually help me get better prices on the assets I'm buying from the boomers who are in the distribution phase of their lives, and better rates should I choose to finance their purchase. Indeed, boomer sellers being under stress from interest rates is a boon to me and those in my age cohort.
 

Exterous

Super Moderator
Jun 20, 2006
19,275
2,100
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From the looks of things, financial advisers are going to tell boomers to move their money from savings to something like a bond market. Then in a couple of years the bond market is going to crash. Which will then wipe out the life savings of millions of people.
Again - that is why people should not be fully invested in only a single asset type.
 

Double Trouble

Elite Member
Oct 9, 1999
9,273
103
106
Your anger should be directed at George Nero Bush.

Inflation peaking at 5.6% (July 2008) and oil (Brent, not WTI?) at $147 around same time (gas approaching $5?), then crashing stock market and economy into near Depression.

Don't you even remember how President-elect Obama had to step in and start making speeches to assure Wall Street that adult supervision would be in place in January.

Dubya quietly slithered away, probably being told not to interfere with smooth transition of power to Obama.
Now why would you follow up an informative post (#8), a post that looks like most of yours with good links and information, with such partisan crap? The whole forum seems infected with this affliction, maybe it's the upcoming election that has everyone wound up.
 

nobodyknows

Diamond Member
Sep 28, 2008
5,474
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Because I have different financial objectives than Boomers low interest rates don't bother me. Heck, since I'm in the accumulation phase of my life, rates being low actually help me get better prices on the assets I'm buying from the boomers who are in the distribution phase of their lives, and better rates should I choose to finance their purchase. Indeed, boomer sellers being under stress from interest rates is a boon to me and those in my age cohort.
It's not all about you. People need a fair return on their cash and they aen't getting it.

The rates listed below are effective as of June 1, 2012
Click Here to download a printable version.

Share Savings Accounts Regular Share Savings $50.00 & Above Compounded Monthly 0.15% APY* Christmas Club Account $50.00 & Above Compounded Monthly 0.15% APY* *APY=Annual Percentage Yield; Rates Are Subject To Change Without Notice.

Checking Accounts $2,500.00-$9,999.00 Compounded Monthly .05% APY* *APY=Annual Percentage Yield; Rates Are Subject To Change Without Notice.

IRA Accounts
$50 - $2,500 Compounded Monthly .25/.25% APY* $2,500 plus Compounded Monthly .75/.75% APY* $10,000 plus Compounded Monthly 1.25/1.25% APY* *APY=Annual Percentage Yield; Rates Are Subject To Change Without Notice.

Share Certificate Accounts & IRA Certificate Accounts
6 Month Term Quarterly Compounding .35/.35% APY* 12 Month Term Quarterly Compounding .55/.55% APY* 18 Month Term Quarterly Compounding .65/.65% APY* 24 Month Term Quarterly Compounding .75/.75% APY* 36 Month Term Quarterly Compounding 1.15/1.15% APY* 48 Month Term Quarterly Compounding 1.40/1.40% APY* 60 Month Term Quarterly Compounding 1.64/1.65% APY* *APY=Annual Percentage Yield; Rates Are Subject To Change Without Notice.

IRA & Certificate Special 38 Month Special Compounded Quarterly .85/.85% APY* Earn up to an additional 1.00 APY on the Certificate Specials. Ask for Details on how you can earn this.**
*APY=Annual Percentage Yield; Rates Are Subject To Change Without Notice. Early withdrawal penalties apply. Minimum balance required for a share certificate account is $500.00. Minimum balance required for a share certificate account for Kids & Teens (Ages 0-18) is $100.00

Investor's Choice Accounts $500.00-$9,999.00 Monthly Compounding .15%APY* $10,000.00-$24,999.00 Monthly Compounding .20%APY* $25,000.00-$49,000.00 Monthly Compounding .25%APY* $50,000.00-$99,000.00 Monthly Compounding .30%APY* $100,000 & Above Monthly Compounding .40%APY* *APY=Annual Percentage Yield; Rates Are Subject To Change Without Notice. Minimum balance required for an Investor's Choice Account is $10,000.00.

The hights rate I see is 1.65% APY. Are you kidding me? If you like low interst then you must like Obama's deficit too.
 

Texashiker

Lifer
Dec 18, 2010
18,811
192
106
And, in return, you will often see negative or very tiny growth rates in regards to inflation. Depending on how long you live and how much you have saved it is very likely cash only will not be enough to sustain yourself through retirement.
How many people lost their retirement when enron crashed? The investors had been told the company was solid and a good investment.

Then there was the tech bubble a few years ago. When I bought cisco and emc stock both were over $100 a share and had a solid track record.

emc and cisco have not seen $100 a share in years.

Then there was the housing bubble.

So what are the people supposed to do?
 

IronWing

No Lifer
Jul 20, 2001
61,866
14,999
136
The banks have no incentive to pay higher rates. The Fed will loan them money at close to 0% so why should they bother with borrowing money from the great unwashed? The Fed is one stop shopping for bargain rates.
 

Hayabusa Rider

Admin Emeritus & Elite Member
Jan 26, 2000
50,872
4,212
126
Because that is the nature of life. You work to survive. If you are able to work enough when younger so you can work less when older, great. But nowhere is it written that anyone is "entitled" to any sort of "retirement" -- much less 20 or 30 or 40 years living off of others' labor.

But yet people are entitled to all sorts of things are they not? We have a whole subculture which exists based on taking and not having contributed at all. No one is entitled to tell another that they cannot enjoy the fruits of their labor yet it is insisted that they have less to spend to feed their harvest to those who choose a life of entitlement. Few seem to have as much trouble with the latter than those who themselves labored. It's a curious thing.
 

nobodyknows

Diamond Member
Sep 28, 2008
5,474
0
0
The banks have no incentive to pay higher rates. The Fed will loan them money at close to 0% so why should they bother with borrowing money from the great unwashed? The Fed is one stop shopping for bargain rates.
That's why I've taken ALL my cash out of the bank and put it in the safe deposit box.
 

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