retirement concerns

[billryan]

I've never met a wolf who thought he was a victim. Plenty of sheep though.
I talk of self empowerment and you twist it into being a store greeter.
The auctions I attend are full of retired folks looking to buy and sell items to supplement their income, plus it's an enjoyable afternoon out.Beats the hell out of sitting around lamenting ones fate.

[Lucky Larry]

many of these folks did nothing wrong, except to not plan for something, historic low interest rates, that had never occurred before and had not even been thought of.

Many of the retired on fixed incomes are victims of life's changes - an illness, loss of a spouse, the recession, etc. The wealthiest country in the world and yet we see the catastrophic impact of these changes especially on many of the "greatest generation" and those who worked by the rules and now face a life of additional hardship through no fault of their own. Just an observation.

[case]

Low interest rates did not happen yesterday. They have been around for a long time. Most people by now have found new ways to make their money grow. Those who struggled all their lives will continue to struggle through retirement. The opposite is also true. (for the most part).
There are many opportunities to make a decent return.
If you are waiting for guarantees to high income you are a few decades to late. You have to move with the times rather than complain about the old days. Things are different in the 2000's. People have to adapt or get lost in the shuffle.

[notes1]

growing one's money and producing an income off one's savings are two different objectives. today's low rates are a recent event, never happened before.

what is the definition of an acceptable interest rate? most are looking for rates that average between 4-5% for a 5-7 year time commitment. according to bankrate.com, those are the type of rates that existed from approx 1990-2007. fixed annuity rates, which have greater penalties for early withdrawals, produced an even higher return. prior to 1990, rates were even higher.

for those who are retired and young enough/able bodied and willing to work to supplement income, good for them. for those who are comfortable considering dividend paying stocks/funds, with the same confidence as a guaranteed account, best of luck. for those who have a substantial pension, I can assure them, they would feel differently, without the security of that pension.

[billryan]

So what you are essentially saying is that those of us who failed to properly prepare and are unwilling to change in today's environment are suffering.
Okay, now that you've repeatedly stated the obvious, what should be done? They already get a monthly check, heavily subsidized health care, and discounts at many businesses. What would you propose? Evidently, moving to cheaper areas is off the table.

[notes1]

-when I said folks failed to properly prepare for historic low interest rates, it was obviously not a serious criticism. how could anyone plan for something, that never happened before. that was why the thread was started, were folks being affected by low rates.

-as to getting a check and subsidized healthcare, correct. let's remember though, they and their employers have been paying into SS and MEDICARE for decades. I do not consider that some form of handout. do you feel the same about all those who get gov assistance who have never contributed a dime?

I think rates need to start rising, slowly, but, starting right now. if the stock market falls, so be it, I will lose along with everyone else. everyone has had time to get enough money out of risk, for short/mid term needs.

while you may feel I am repeating the obvious, you are entitled to your opinion. I do not believe the average person has any idea how we arrived at these rates and many do not fully understand the risks of substitute investments, in order to get a yield. if enough folks raised enough hell, it might influence policy makers.

[notes1]

in December, 2015, the fed raised rates 25 basis points and announced they would likely raise rates, three additional times, over the year. after today's fed meeting, the decided not to raise rates...again. as it is very unlikely they would raise rates at their November meeting, possibly affecting the election, they have only one more chance to raise in December. they said 4 total increases were likely, they might actually do two.

Japan's own fed, already has rates in negative territory, took more action last night, effectively capping long term rates.

and, Europe shows no signs of ending it's low rate policy.

looks like the search for safe, reasonable yield for those who do not want risk, have a long wait ahead of them.

[seemoreroyals]

in December, 2015, the fed raised rates 25 basis points and announced they would likely raise rates, three additional times, over the year. after today's fed meeting, the decided not to raise rates...again. as it is very unlikely they would raise rates at their November meeting, possibly affecting the election, they have only one more chance to raise in December. they said 4 total increases were likely, they might actually do two.

Japan's own fed, already has rates in negative territory, took more action last night, effectively capping long term rates.

and, Europe shows no signs of ending it's low rate policy.

looks like the search for safe, reasonable yield for those who do not want risk, have a long wait ahead of them.

With this in mind I recently had a CD and a corporate bond that got called. I really wanted to find a safe place to reinvest but I held my nose and here is what I settled for. I purchased a muni that has a coupon of 5% which in itself is great but I had to pay a premium of almost 116% to purchase it. If it gets called at its first call date in 2022 my YTC will be 2.05% and if it goes to maturity in 2031 my YTM will be 3.67%.

For my corporate bond I bond issued by I REIT with a great credit rating with a coupon of 5.25% and had to pay 107% of face value to purchase it. It is non callable and has nine and a half years left on it. The YTM on it is 4.33% but I have to pay taxes on it.

Unfortunately this is about the best you can do in today's market. My fixed income adviser at TD Ameritrade presented me with a 7 year CD that pays a little over 1.5 % for the first 5 years and steps up to about 5% after 5 years if not called. I did not bite on it because if I am going to earn that little on my money I want the flexibility to flip it into something else in no longer than a year. I keep thinking interest rates are going to go up but so far that has not been the case.

[notes1]

I do not make comments on any investment, but the choices you made, are an example of what folks are forced to do, to get any kind of yield.

one of the other things the fed does is make projections. one would think having some of the smartest financial folks on the planet involved in the process, there would be a certain expectation of accuracy. their 'guesses' on growth and future interest rates have been pathetic. their newest guess on interest rates is they will only rise by a total of 1%, on the 10 year treasury, two years from now. last week, ben bernacke, said negative rates in the usa, should not be ruled out. I have no idea, but we are a long way from the old normal.

[notes1]

just read an article on cnbc.com, some really amazing numbers.

-there is currently $230 trillion in global debt. more than 3 times the amount the world held during the credit crisis.

-in the usa, there is more than $63 trillion of combined public and private debt.

-there is only $3.8 trillion total dollars in circulation.

-each dollar in circulation has been lent/borrowed more than 16 times.