by Calculated Risk on 9/08/2010 08:34:00 PM
Wednesday, September 08, 2010
The Frugal are Losers Too
From Graham Bowley at the NY Times: Debtors Feast at the Expense of the Frugal
For example, anyone keeping $500,000 in a 12-month certificate of deposit earning a rate of 1.5 percent annually — one of the best savings rates available nationally these days — would earn $7,500 a year, hardly enough to live on. Just three years ago, that same investment would have generated $26,250.Obviously retired people, living on bond yields, are taking a hit as bonds mature. And this is pushing some conservative investors into riskier assets too.
... Anyone investing $500,000 in 10-year Treasuries at current yields would earn $13,500 a year.
The BEA has been reporting that Personal interest income has been falling since Sept 2008, and I expect interest income will fall further as bonds and CDs mature.