The Daily Item, Sunbury, PA

Business

May 27, 2013

The Color of Money: Stretching your retirement dollars

(Continued)

     The Fed policy cost depositors more than $120 billion in purchasing power in the 12-month period ending in March, according to MoneyRates.com, an online site that helps users find the highest rates on their savings. Over the last four years, the lost buying power comes to $635 billion.

     Using the $8.8 trillion on deposit in U.S. banks at the end of the first quarter in 2012, MoneyRates.com calculated the interest that would be earned on that amount for the year using monthly average money market rates from the Federal Deposit Insurance Corp. The value of the deposits, plus that interest, was adjusted for inflation to come up with the total change in purchasing power.

     Because people aren't earning enough interest to match or stay ahead of inflation, they are losing buying power. This means that when prices rise, they can't buy the same goods tomorrow with their saved cash.

     "The Fed's monetary policy is not a cost-free tactic," Richard Barrington, CFA, senior financial analyst at MoneyRates.com, said in an interview. "Savers are paying for trying to jump-start the economy. The irony is we had a financial crisis that was caused by too much borrowing. Borrowers committed the crime and the savers are doing the time." 

     So what now?

     Until financial institutions begin to pay more for deposits, you need to be extra diligent in shopping around for the best rates. "They are low but not all equally low," Barrington said. "Look for the best of a bad situation in terms of rates."

     Try online banks, which have been having a price war over the last six months trying to woo depositors, he said. But first double-check that the institution is FDIC-insured.

     Don't lock into long-term CDs. It used to be that you could get a decent rate on a five-year certificate. Not anymore. As of May 20, the FDIC was showing the national average rate for a 60-month CD as 0.74 percent. That's only marginally better than the 0.21 percent rate for a 12-month CD. "It's a good time to keep your CDs fairly short," Barrington said. By buying shorter-term CDs, you can reinvest your money should rates rise.

Text Only
Business
  • A checklist for keeping you focused at work

    A quick check of Facebook and next thing you know, a half-hour’s passed. Start chatting with a co-worker and suddenly 20 minutes is gone and the report you were supposed to finish by lunch is late.

     

    July 31, 2014

  • Fancy management systems won’t fix bad managers

    In violation of my long-standing “only watch TV” rule, I read an article recently about how Zappos is adopting a management structure known as holacracy.

    July 30, 2014

  • Your Office Coach: Supervisor-employee boundaries must be honored

    QUESTION: Two weeks ago, my husband “Barry“ unexpectedly came home from work with a large flat-screen television. He explained that one of his employees gave it to him as repayment for a loan. I was shocked, because I had no idea that Barry was lending people money.

    July 29, 2014

  • Silly mistakes that sink job applicants

    Some employers won’t care - or won’t catch them - but mistakes in word usage can put your application in the reject pile.

    July 29, 2014

  • Watercooler: Raised to the roof

    Q: Over 15 years, I have worked my way up the corporate ladder with the same organization. I have been given a raise every year and excellent reviews, as well as several promotions.

    July 25, 2014

  • Career Coach Q&A: job search follow-up; introverts as leaders

    Starting a business:

    Q: I have a stable job that I don't hate, but I have an idea for starting my own business.

    July 25, 2014

  • How to become a leader

    QUESTION: I’ve just been promoted into a leadership role. I’m excited, but also kind of overwhelmed. What do I need to do to be good at my new job?

    July 24, 2014

  • Balancing Act: How much is your time worth? Consider outsourcing some tasks

    Todd Paton has a booming business getting customers noticed on the Web. One tool he uses is generating online press releases to build brand awareness and create links that will send traffic to a customer’s website. But Paton, owner of Paton Internet Marketing, acknowledges that writing the releases is not his strong suit. Rather than spend his time doing it, he hires out the task.

    July 23, 2014

  • The Color of Money: No easy way to get out of debt

    Many people who are deeply in debt are desperate for a quick fix. They ask the question: What can I do to get out of debt?

    July 21, 2014

  • Watercooler: When to speak up if you see problems down the line

    Q: Our organization has hired a new director. I am one of a number of division heads; above us, there's the associate director, and above him is the director. The associate director is feared and disliked for his duplicity and dictatorial nature, though few have come forward because of his vindictiveness.

    July 18, 2014

Business Video
Stocks