“U.S. households lost billions in interest income during the Fed’s near-zero interest rate experiment. Because they are often reliant on income from savings, seniors were hit the hardest.
For households headed by seniors 75 and older, the loss was $2,700 annually. With a median income for senior households in the U.S. of roughly $25,000, these are significant losses.”
Charles R. Schwab, founder and chairman of the Charles Schwab Corporation, “Raise Interest Rates, Make Grandma Smile,” The Wall Street Journal, November 19, 2014
The Takeaway: Like many financial professionals, we both understood and supported the Fed’s move to lower interest rates and prop up the economy after the Great Recession. Unfortunately, that relief has come at a cost. It has hurt seniors who rely on investment income to cover retirement expenses, especially those who favor low-risk CDs and bond investments and shy away from stocks. It’s an illustration of how policy measures can have unintended consequences, and a reminder of why rates need to return closer to normal as soon as economic conditions permit.