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Interest rates and retirees

Updated:
The cut is good news if you want to buy or refinance a home, or consolidate a loan. But if you depend on interest rates for income, it's a different story.

The interest rate cut was among the dinner table topics at Marriott Brighton Gardens Assisted Living. Interest rates haven't been this low in 39 years, when many of these residents were still working and rearing families. 93-year-old Irma Graham says so far her savings is intact, but she's concerned it may not stay that way. "I'm losing it every day in the drop in interest and I know with one the income is half so far this year, or less, than it was."

These retirees are fortunate; secure enough to afford retirement living. Thousands more rely heavily on interest income from certificates of deposit, especially those who've been retired for a while. Donna Hiner, Financial Planner: "They remember back in the 80's when they got 10% or 12% on their CD's. That was all they needed -- the interest from those CD's would provide income." Now that interest often doesn't even keep up with inflation. But Hiner advises seniors, and everyone else, to sit tight for now. If you have CD's that will mature soon, consider laddering them. "That means simply if you have 50 thousand, don't put it all in one maturity maturing a year from now. Spread it out, so that it matures part in one year, part in two years, maybe part in five years."

She encourages everyone, especially seniors, to talk with a professional about allocating money in a few different investments. "So they'll help them work out some kind of action that is a planned action, not a reaction. And I think that's what we're hoping people won't do is go out and make quick decisions without thinking it through." And, she advises, there's reason to be optimistic. Like Irma. “I can weather the storm. I'm OK."

Hiner says be wary of special high interest rate offers at this time, which usually require tying your money up for a longer period. She also suggests calling different banks for interest quotes, which may vary as much as 1% to 2% from bank to bank.
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