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A blog about living in and planning for retirement

Low Interest Rates Weigh on Retirees

Low interest rates may be a boon for those in need of a loan. But they are anathema to retirees, who must live on their investments and the income they generate.

According to the latest installment of a quarterly poll by Wells Fargo & Co. and Gallup, Inc., investor confidence declined sharply in recent months from +40 in February to +24 today.  Among retirees, the decline has been especially sharp — from +61 a year ago to +38 in February to +17 today.

For retirees, low interest rates are a big part of the problem, according to Karen Wimbish, Wells Fargo’s director of retail retirement.

“A year ago, retired investors were three times as optimistic as working Americans and now retirees are less optimistic,” Ms. Wimbash said in a press release.

“Our questions on interest rates show the impact low rates are having – they are challenging for retirement nest eggs, particularly when core inflation rate growth is about 3% a year and CD rates are yielding less than 1%,” Ms. Wimbash says.

Conducted from May 4-12, the poll includes responses from 1018 individuals, each with investments of $10,000 or more. The responses indicate:

  • 33% of respondents say low interest rates will cause them to delay retirement.
  • 45% of non-retirees and 34% of retirees fear that today’s low rates may cause
  • them to outlive their money.
  • 26% of non-retirees and 19% of retirees say low rates will cause them to put money in investments they might have avoided.
  • 32% think today’s low interest rates are likely to lead to a sharp increase in inflation.
  • 29% of non-retirees say rising healthcare costs have reduced their ability to save for retirement
  • 12% say rising healthcare costs have forced them to delay retirement.

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    • The article is a fluff piece that states the obvious and does not merit being carried in the online version of the WSJ.

      Any retiree has ready access to a high number of no-load mutual funds of high grade corporate bonds or government bonds (GNMA, etc.) that pay 4% – 5% interest with a fluctuation rate of plus or minus 5%.

      A variety of issuers, including USAA, all the mutual funds to be linked to checking or savings accounts for deposits or withdrawals. All transactions can easily be made via the Internet on a PC, tablet, or smart phone.

      It does not require getting up from the couch, but it does require being an informed investor that realizes that the bank’s best and only friend is the bank.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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