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Why Rising Interest Rates Won’t Benefit Savers

Monday, June 24, 2013 - 6:44 PM
From Yahoo! Finance:
With the Fed now signaling a pullback on some of its easy-money policies, interest rates on some types of loans are rising. Yet savers may continue to suffer because the Fed is coaxing up long-term rates while continuing to keep short-term rates extremely low.

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3
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,743
1. Monday, June 24, 2013 - 7:00 PM
While long rates have already begun to drift higher, a meaningful improvement in savings account rates and other deposit rates seems further off. These are short-term rates, and thus more closely anchored to the federal funds rate. Also, they are less directly driven by market forces, and thus less likely to rise in anticipation of economic improvement. These bank rates are more likely to rise after, not before, stronger growth takes hold.

June 2013 Fed Statement Brings Little News
1
ShorebreakShorebreak2,378 posts since
Apr 6, 2010
Rep Points: 12,697
2. Monday, June 24, 2013 - 7:20 PM
Nowhere to hide is right: I would never think that FINPX could drop 9% YTD.  Thus no bond funds.  No stock funds, either with the recent large drops.  How about low-rate CDs?  How about (2%, $10K) RCAs?  I am sure that stable value funds are next to drop (from the nominal 3% to 0-1%). 

For retirement money with at least 5-year time horizon, keep the minimum equity coverage (say 15% - 20%).

For money with short time horizon, put it in multiple RCAs (one can still get (3%, $25K) if one really tries).
3
51hh51hh1,462 posts since
Jan 16, 2010
Rep Points: 6,352
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