I adopted my oldest daughter in 1979. Because her birthmother had died, and because her birthmother had a work history, this child received Social Security. For the first couple of years I invested the social security payments in CD's every month. What I remember the most strongly was being disappointed when the interest rate fell below 10%. It just didn't seem fair!
I was reminded of those glorious interest rates (carefully forgetting the double digit inflations rates also in effect in the early '80's) when I read this article from the Wall Street Journal. (Thanks to Boston Gal for the link.)
While the feds have necessarily held the line on interest rates for the good of the general economy, that line has not been at all kind to savers, particularly retired savers who were counting on interest rates to provide income without invading principal. These days, one feels good if interest rates break 1%, and mostly, they don't.
Boston Gal wondered why some of those interviewed didn't consider working, at least part time. That hardly seems like an option for the 91 year old retiree with whom the article opened. But I'm guessing that most of the folks in the two Florida retirement centers came there from somewhere else, and that employment opportunities are not as available as they might have been had they stayed in the communities where they were formerly employed.
It's my understanding that, as a whole, we are all saving more these days. But I didn't realize that these statistics include debt reduction as a form of saving. It is, but that doesn't mean anyone's bank account now has more cash in it.
On a very personal level, I ran the Socal Security calculator to see what I could expect. From Social Security alone, I would get $1398 right now if I retired. Not only is that not enough, but I'd have to pay for health insurance to cover me until Medicare kicks in in three years. If I wait until age 66, I'd have approximately $1962 per month and access to Medicare. And if I wait until my projected retirement date when I'm 69, I should get around $2700 per month.
Right now, I live on approximately $3600 per month since I put away over $1000 a month into my 401(k).
Financial Engines projects that I will have $404,000 in my 401(k) by the time I'm age 69. At 1% interest, that will add $336 a month to my income. At 4% (which is the figure most retirement calculators use for regular withdrawals), I would have an additional $1347 a month.
With that kind of income plus the sale of my rental home to provide the basis of a travel/entertainment fund, I should be fine.
But then, the retirees in the article thought they'd be fine as well. Having had the foresight to save on a regular basis, they are now feeling punished. Not only does this have political repercussions (because retirees vote more often than the general populace, particularly when they are unhappy) but it discourages saving among younger citizens. As the authors of the article note, low interest rates "also penalize people of any age hoping to build up funds for the future, and discourage rainy-day savings that could make U.S. consumers more resilient to job losses and other financial jolts."