Interest rates come into play when you need to borrow money or when you have money you want to invest. Right now, we are seeing some of the lowest interest rates in a long time and that is good for the first group and bad for the second group.
Banks are always going to charge you a lot more to borrow money from them than they are going to pay you in interest to lend it to them. The difference in this amount is the spread and it is where they make their money. Right now is a great time for banks and lending institutions because they are now getting money from people that they turn around an loan out and they are paying next to nothing in interest for that money.
The best money market rates, CD rates, Treasury bill rates and any other kinds of rates are all as low as most of us have seen in our lifetime. If you want more than 1%, you are going to have to loan out your money for several years. Getting 1% interest is pretty close to getting nothing and so this is a very difficult time for anyone who has excess money to invest and wants risk free interest.
Interest rates are affected by many things but it is ultimately the Fed that decides what they will be. The Fed is part of the government and that means there is immediately a lot of distrust. Having rates so low means that anyone with money (what politicians call the rich) cannot make very much money with that money. This is especially harmful to older people and senior citizens because they are the biggest group that relies on the interest income their investments make.
Now, with rates so low, anyone who wants a better rate of return needs to take more risk and buy bonds or stocks. This is something that is not advisable for most older people because they need to keep their money safe. If you are asking yourself “when will interest rates will go up?”, there is no answer to that question and so it leaves many people wondering what they should do. Should they take more risk and hope for the best or should they try to struggle through and slowly deplete their savings? I wish there was a clear answer.
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