How Artificially Low Interest Rates Have Penalized Retirees

By Joshua Mellberg

Retirees who depend on interest from savings to make it month to month haven’t had much to cheer about for several years. Interest rates were so low they might as well have been set at zero.Those low rates have been great for Wall Street, but not so great for retirees. Short term, Wall Street would prefer zero interest rates because it’s essentially free money to borrow, which allows for higher corporate earnings. Savers and retirees, on the other hand, have taken it on the chin.They can’t generate much of a return on their savings, and they may not be in a position to risk their money in the markets where a higher yield is possible.

Interest rates, though, are about to get a boost.

The Federal Reserve recently announced plans to hike its benchmark interest rate by about ¼ percentage point, the first increase in nearly a decade and a signal that the Fed is confident the U.S. economy has improved. But if you are a retiree who depends on interest income, don’t look for this to be a miracle fix. It’s an improvement, but savers aren’t going to see a large enough jump in interest to suddenly turn their finances – and retirements – completely around.

You hear complaints from retirees about the interest rates and you can’t blame them. Many older people put their money into treasury bonds or CDs, and live off that interest. They have been penalized the hardest over the last several years because the Fed decided to artificially keep rates low.
That experience shows why it’s important for people to take an active role in their retirements. I suggest three important points to keep in mind when planning for those so-called golden years so you can thrive and not just try to survive:

• Don’t let things just happen. Take control of all aspects of your life in retirement, from how you spend your time to how you manage your investments. The old days of company pensions are gone for most people, so when you accept that the quality of your retirement is largely up to you and you act based on that idea, you are likely to have a happier and healthier retirement.
• Focus on finances, not age. Traditionally, people think of retiring at a certain age, such as 65, but that’s not the best way to plan. Instead, let finances be the deciding factor for when you are ready to retire. With that approach, you are more likely to have the savings necessary to sustain you for the rest of your life.
 Don’t go it alone. Planning the right strategy for retirement is complicated, yet many people try to do it without seeking assistance from a professional. it’s important to get advice from someone who understands all the options and the pitfalls, and can help you get the most out of your retirement dollars.

Joshua Mellberg is an Investment Advisory Representative and licensed insurance agent. He is a sought-after speaker on retirement income planning strategies who has been featured on CNBC, PBS and Yahoo! Finance. His entrepreneurial career started in high school when he managed his own lawn-care business. While in college at Western Michigan University, he ran an online collectibles business and four construction crews building lofts in college dorm rooms. After graduating with a business management degree, Mellberg began his financial career and quickly realized that certain financial products weren’t optimal for every client. This prompted Josh to start J.D. Mellberg Financial (www.jdmellbergfinancial.com), where he vowed to always offer clients a wide array of proven retirement products and services to help protect and then manage their assets to fit their goals.