By Ben Carlson, CFA
A Wealth of Common Sense
Today’s paltry yields don’t come close to covering taxes and inflation.
Looking at these numbers brings up some questions:
- What if we never go back to the halcyon days of risk-free income on our savings?
- Why should people earn so much money on money that takes no risk?
- How do retirees find “safe” income from their investments in a world with no “safe” yield?
- Which one would you rather have—higher yield on your savings account or lower yield on your debt?
How you feel about the current rate situation has a lot to do with where you are in life. If you’re a retiree who has their mortgage paid off and just needs their portfolio to throw off some income, you’re none too pleased with where rates are. If you’re a young person who is borrowing money to buy a home, you should be thrilled with where rates are.
Yes, it’s harder to earn risk-free interest on your savings, but the amount you can save over the lifetime of a loan can more than make up for lost interest income.