Low Interest Rates Hurt Those With Money
For the last two years, money market and CD rates have been steadily falling. No matter where you look you are not going to find anything very high right now. For retirees who rely on interest income, this is a trying time. Retired people who are older have Social Security and many of them also need the income that comes from interest on their savings. With interest rates so low, this interest income has dwindled and put many retirees in a bind.
With CD interest rates and money market interest rates so low, there is really no safe place for retirees to put their money and get a reasonable rate of return. This is why retirees are also having a tough time in this atrocious economy. They don’t have to worry about losing a job like many folks do but their income has taken a big hit too.
The best money market interest rates are usually going to be lower than CD rates or government bonds. This is because the money you put in a money market account is not locked up like it is with a CD. Most money market accounts allow you to make periodic withdrawals and you can take all of it out at any time. This means you get a lower interest rate than some other investment vehicle like a CD where you agree to leave the money in for a predetermined length of time.
Money market accounts are a place to park money that is in transition and they are very common in stock market portfolios and stockbroker accounts. No matter how much you search, you will not find any interest rates that are anywhere near as high as they were 3 or 4 years ago. Anyone that has extra money and wants a safe place to put it should be prepared to get little in return.
If you want to take a little risk you can try something called social lending. With social lending, you are lending money to another person rather than a banking institution. You do this through the Internet and you will get a much better rate of return, usually upwards of 6%. There is more risk though, as there must be, because the person could default on the loan. It is worth looking into though, if you are willing to accept the added risk to get a better rate.