Banks’ Record-Low Interest Rates Frustrate Nation’s Savers

The Boston Globe has the article Banks’ Record-Low Interest Rates Frustrate Nation’s Savers on its front page today.

Neil Silverman, a Framingham engineer, diligently saved for decades, accumulating a nest egg worth more than $1 million.

But when Silverman reached retirement age, he encountered an unexpected hurdle: interest rates so low that his savings are generating little income. Even $1 million in the bank at 1 percent interest yields just $10,000 a year — not much to live on.

In my reaction that I posted on the web site of The Boston Globe, I said:

What is a retiree with over $1million  nest egg doing investing in CDs?  With high quality companies with decades long records of paying increasing dividends now paying at rates from 3 to 5%, that $1million could bring in $50,000.  Along with Social security, Silverman could be taking in $70,000 per year, and the increasing dividends would also lead to capital gains.

Just shows that the idea of people taking care of their own retirement investments is not such a good idea even for people as smart as a retired engineer.

I am a retired engineer also.  My nest egg is almost back to pre-2009 levels and I have been living off the income from this nest egg for over 6 years.

They say that the worst thing that can happen to your retirement savings is to have a severe loss of value in the first years of your retirement.  Well, that is exactly what happened to me.  However, my diversified portfolio of high quality, dividend paying stocks has kept my income at a comfortable level quite independent of the current market value of my stocks.

Maybe the Globe could do all retirees a favor by researching and then explaining how this type of strategy works.  I’d be glad to help the Globe, if they were interested.

Since the subject of the article lives in Framingham, maybe I should have mentioned my cousin in Framingham who could do an excellent job of explaining the investment strategy that I mentioned.  He is a better practitioner of that strategy than I am, and I am doing well enough with the strategy to be satisfied.

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