A recent article at Fox Business looks at the effects of low interest rates on retirement savings. As it points out, back in the day, an interest rate of 5 or 6 percent on a CD would generate $50,000 or $60,000 on $1 million in savings annually. However, Fox notes, some CD rates are currently down to 0.17 percent.
But this doesn’t mean it’s impossible to create a strong retirement savings plan. For instance, as an online bank, Ally doesn’t have expensive physical locations, which makes it easier for us to offer competitive interest rates on our saving products. As of this writing, our 5-year IRA High Yield Certificate of Deposit comes with a 1.51 percent interest rate.
When it comes to your other investments, Fox Business notes that you should be prepared to adjust your income target and asset allocation on the fly, as well as limit riskier investments. The site also suggests withdrawing a lower percentage during retirement, which means putting away more when you’re still working, or maybe figuring out a way to live on a bit less during those later years.
How have you adjusted your savings strategy to make up for lower interest rates? What are your rules for investing?