The NY Times reported on Thursday, September 9, 2010 (reporter Graham Bowley) that “Households and corporations alike are refinancing to take advantage of interest rates that seem impossibly cheap. But those same low rates come with a flip side, driving down the income of retirees and others who live off their savings. It is a side effect of a government policy meant to push down interest rates to a point that busineses and consumers are compelled to borrow and spend again, and yet it is hurting anyone with a savings account.”
“Perversely, coming after a devastating financial crisis caused by companies and households that feasted on borrowing, ultra-low interest rates are penalizing people who have paid down their debt and are now trying to save. it is also punishing those who rely on the proceeds of their nest eggs to pay bills.” reports Mr. Bowley.
See link to NY Times article: http://www.nytimes.com/2010/09/09/business/economy/09rates.html?_r=1&scp=1&sq=Debtors%20feast%20at%20the%20expense%20of%20the%20frugal&st=Search
IDEAS FOR ACTION: Should you remodel part of your home into a mother-in-law apartment? Perhaps you can avoid this extreme measure for now. But you should definitely “talk turkey” about retirement plans and intentions of middle-aged and elderly family members. Perhaps some synergistic accommodations can be reached. E.g. if both you and your spouse work outside the home yet have childcare needs, perhaps you could pay mom or grandma to conduct the childcare. instead of a daycare. Grandma or mom could likely use the extra money that you are now spending on daycare/nannies in order to help them shore up their coffers of funds set aside for retirement, since their returns on normal conservative interest bearing investments are presently so low.
