Millions of Americans are paying a high price for a safe place to put their money as banks offer extremely low interest rates on savings accounts and CDs according to the New York Times.
The elderly and others on fixed incomes have been especially hard hit and many have seen returns on savings, C.D.’s and government bonds drop so much that it’s often costing them money once inflation, fees and taxes are considered.
“The unemployment situation and the general downturn in the economy had an impact, but what’s going to happen now as C.D.’s mature is that retirees and the elderly are going to take anywhere from a half to three-quarters of a percent cut in their incomes,” said Joe Parks, a retired accountant in Houston on the advisory board of Better Investing, an organization that works to help people become savvier investors.
People who rely on income from such investments for support, however, are being forced to consider new options.
For example, Eileen Lurie decided to take out a reverse mortgage to help offset the decline in returns on her investments tied to interest rates. Lurie told the NY Times the bank was going out of its way to explain the product to her. “These banks don’t want to be held responsible for thousands of seniors standing in bread lines,” she said.
“If your assets aren’t appreciating and aren’t producing any income, you’re getting eaten up in this interest rate environment,” said Peter Strauss, a lawyer who advises the elderly. “A reverse mortgage is one way of making a very large asset produce income.”