If you’re nearing retirement and looking forward to living off the interest of your retirement savings you may have to consider staying in the job market for another year or so. Interest rates have hit record lows recently; a turn of events which is good for homeowners and borrowers, but very bad for seniors hoping to make the most of their retirement savings.
An article in the USA Today Money section reports that “The bellwether 10-year Treasury note yielded 1.46% Monday and went as low as 1.44% in intraday trading… Rates on 30-year fixed mortgages closely follow the 10-year T-note yield. On Thursday, the average mortgage rate fell to a record low of 3.56%.” This isn’t all; currently “Money funds yield an average 0.03% [and] the highest-yielding one-year bank CD, from CIT bank, yields 1.1%.”
What all of this means is that the percentage of income workers have been putting away for retirement all these years isn’t giving them much of a return right now—if it’s giving them any return at all. Seniors who were planning to live for a certain number of years off the income of their investments are finding themselves having to work longer than they had planned, or they find themselves dipping into the principal of their investment—a move which could leave them scrambling for living funds a few years down the road.
Some seniors are choosing a different kind of risk. “To get more income, some elderly have been pushed into riskier investments, such as stocks, to get higher yields.” Unfortunately, these higher yield stocks can be very unstable and end up tanking, losing both the potential income as well as the initial investment.
There are no easy solutions to this problem, especially if you’re already in retirement or nearing retirement age. The best thing you can do is be careful with your money, give yourself room to work a few more years than you may have initially planned, and above all, keep the lines of communication open with your experienced and trusted advisors.