Retirees at Risk in Ultra Low Interest Rate Environment

In a recent op-ed piece in The Wall Street Journal Charles Schwab highlights the fact that the vast majority of retirees in the U.S. are suffering in the current low interest rate environment.

The paltry returns on savings--the average rate on a one year CD is 1.3 percent--are 76 percent lower than even four years ago.

Schwab also makes the point that banks--in contrast to millions of seniors--have been clear beneficiaries of the low interest rates and essentially "free money" that has been delivered to them by the Fed.

While some may argue that retirees benefit from the low rates of inflation that accompany the low interest rates, this really is not the case.

Personal rates of inflation vary widely among demographic sectors, and rates of inflation for seniors can be dominated by healthcare expenses which tend to be highly inflationary.

Ultra low interest rates and a high personal inflation rate are quite a brutal combination.

Source: Wall Street Journal