Low Rates Hurting Our Seniors

I remember listening to my parents and their friends talk about retirement when I was just a young boy. My dad owned a small grocery store on the lower Eastside of Manhattan (NYC), and my mom was a wonderful, loving homemaker. Saving money was a lesson that was taught early to us, making weekly trips to the credit union with our little white envelopes filled with change. The conversation among the adults always shifted to retirement, and the consensus was that most would “just live off the interest”. That seemed to make sense, as inflation was modest, and rates at banks exceeded inflation. This would nicely supplement one’s Social Security benefits or any small pension received.

My, how things have changed. Large pensions are becoming a distant memory; the average Social Security benefit check is under $1100 a month; CD rates at banks, even for a 5-year CD, are under 2%. Just recently I checked rates at several internet sites, and a variety of banks. The average 3-year CD paid 1.44%. That means $100,000 would yield you $4415.00 in interest over three years, or just over $100 a month. You try to “live off the interest” at these rates. And this figure assumes one has $100,000 saved already. The most brutal fact is that our FED has announced that they will keep rates low until 2015 – three more years. They did not consider the devastating effects this will have on seniors. Many seniors live on fixed incomes, and their basket of monthly purchases are more prone to inflation – medications especially, and related health services. Many do not have the ability to supplement their incomes with a part-time job, nor can they afford to take on more risk in the markets. Unfortunately, many turn down their quality of life that matches their income. That often puts them at risk, as they skip things such as nutritious food, proper medical care, socializing – all things that keep them healthy.

As a reverse mortgage consultant, I hear these concerns everyday. I hear them from the seniors themselves, and from their adult children who often have to bear the financial responsibility for their aging parents. I am proud that I can sit down with them, their parents and their advisors and offer some tax-free options, using home equity responsibly. When one runs out of money, one runs out of options.