Source: http://www.aarp.org/money/investing/info-01-2012/war-on-savers.html

I see the Federal Reserve has again announced that they will maintain a near 0% interest rate through at least mid 2013.  That might be good for the young couples who are looking to buy a foreclosed home but it is killing us seniors. I have had this topic on my blog list for quite some time now and the recent article in the February/March AARP magazine entitled The War on Savers  by Carla Fried brought it to the top of the list.  Here are some of the words from the article:

“This country was built on hard work and savings but is now really screwing over savers,” says Hal, 78, who served in the Air Force for 23 years before working for more than three decades in the private sector.  The Rawleys — and millions of other older Americans seeking safe income — have become collateral damage in the Federal Reserve’s strategy to rescue our moribund economy. More than three years ago, the Federal Reserve stepped in to buoy the cratering financial sector and protect the economy from a Depression-magnitude backslide…

That means for five years running you won’t earn anything meaningful on safe bank deposits such as CDs, and what you do earn won’t keep pace with inflation.

For those who depend on their investments to pay for the month-by-month things there are very troublesome times. It used to be that you could make up a “CD ladder” that would provide you with income for these expenses. But now it seems that that ladder is made up of CDs getting less than 1% interest! What is a person to do during these times. Are they to dive into the stock markets with their inherent downturns and hope that they don’t loose their retirement savings? Are they to spend down their capital and hope that it lasts? These are trying times indeed. The above article does go on to give you three steps in trying to keep what little you can get for your savings.

During my working life one of the monthly investments I made was to buy a $100 to $500 (the bond amount bought increased over the years). It turns out that the savings in this area amounted to about 15% of my total savings. I was mocked by some saying why are you buying savings bonds when you could be in the stock market getting a much higher return? Well it now turns out that the monthly interest I get from those bonds drastically exceeds all the income generated from the other 85% of my portfolio and there is little or no risk involved except the usual one of the Republicans trying to cancel payments on them :)

I certainly hope for more normal times to return in the coming years so that seniors can once again get a little interest from their life time of savings without the risk of losing it all.