Saving for Retirement with Low Short Term Interest Rates

Current savings rates are extremely low right now and even the highest savings rates are available from banks and credit unions are low. The best savings rates, CD rates and mortgage rates have all been very low the past few years since the recession. The slow economy recovery has forced the Federal Open Market Committee to keep the Fed funds rate at zero percent.

A low Fed funds rate at put downward pressure on interest rates to foster growth through borrowing, what got is in trouble in the first place. For example the highest savings rates and money market rates available from any bank is just above 1.00%. The Federal Deposit Insurance Corporation (FDIC) has a average national rate for savings rates which is 0.10 percent. Money market rates are slightly higher at 0.14% and CD rates are around 0.41%.

If you’re retired and relying on interest income from savings accounts, certificates of deposit or money market accounts. How is one supposed to live on or save for retirement with such low deposit rates on bank products.

If you’re younger time is on your side but you’ll have to combine savings with investing in riskier assets like stocks or real estate. Growth in stocks and real estate has been higher historically but not the past several years.

The advantages of deposit accounts are safety and compound interest which basically is the interest you earned on your money also earning interest. Compound savings interest is a powerful investing tool which over time allows you to earn a lot more money than you normally would earn without the interest earned earning interest.

When you save and invest you need to plan ahead for the next 40 or 50 years and save because the entire point of retiring is not working which means not earning money. When you start your savings and investing for retirement you invest wisely because doing so staying on top of your savings and investments will give you the ability to retire when you want to.

To bad we won’t enjoy the savings rates and CD rates my grandparents enjoyed when they were earning savings rates in the double digests, these days we will be lucky to see 5 year CD rates at 5.00% in the coming years.

Even if you have a nice nest egg of savings currently you will still need to save more to meet your retirement goals. The first steps when starting a savings plan is to open a savings account or a certificate of deposit. You also need to figure out how much credit card debt you have and possibly pay that off first since your credit card rates will be higher than any savings rates you can get.

All financial planners agree, the first and most important step for a successful financial retirement is for young folks to start saving money and investing money yesterday. The second best time is today.

All your dreams can come true if you just start now and have a viable plan of savings/investing with paying off high interest credit card debt is the key, car loan or a mortgage loan. Or refinance to lower interest rates to save money on interest expenses.

Part of savings is to pay yourself first. Open an account with the highest savings account rate you can find which will probably be at a local credit union or bank. Once you open the account setup an ACH deposit from your paycheck into the savings account.

The best place to find the highest interest rates on savings accounts is to search and compare savings account rates on the Internet. Why not be an excellent manager of yourself and not rely on someone else who might steal your money or charge you more in fees that will eat into your investment return.

Savings Rates, Where to Get The Best Rates On Savings Accounts

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Savings Rates

The best savings rates today are every low these days, in fact even the best savings rates are pathetic. Interest rates in general have been low since the recent recession and the extremely slow recovery and the unwinding of the credit bubble. You probably won’t see savings account rates, CD rates or mortgage rates move higher until early next year.

To give you an example of the highest savings rates or money market rates right now you will be hard pressed to any bank offering a savings rate of more than 2.00%. The current national average savings rate reported by the FDIC is only 0.13% this week, down from the prior week’s average savings rate of 0.14%. Thankfully the best savings account rates are higher than the averages.

How are young people supposed to save for retirement with such low interest rates? One advantage is if you’re young and just starting out working, saving money you have a couple of advantages over people older than you. The advantages are time and compound interest.

The years can go quickly so time is on your side but you need to start saving yesterday. If If you haven’t started yesterday then today is the day to start a savings account and compare the highest savings account rates. When you’re comparing savings rates you’ll see two rates, the actually savings rates and the other rate is the annual percentage yield APY.

APY is interest earning interest, known as compound interest. Compound interest will help you retire quicker because it is having your money make money for you.