Are retirees seeking safe investments paying the price for Fed action?

The go-to strategy when a financial crisis hits is for the Federal Reserve to cut interest rates. The theory is that, by making borrowing cheaper, consumers will help rev up the economy by buying stuff on credit.

But this quick fix has seriously hurt savers, especially those retirees who have sheltered their hard-earned savings away from the stock market. And as the Dow Industrial average continues its hair-raising volatility, more retirees will likely flee to bank-deposit accounts. However, with interest rates now at rock bottom, these savers will be exposed to another major risk - inflation.

The government’s fiscal policies punish savers, asserts Sharon Kimball, who retired from the federal government in 2018 after almost 30 years. Kimball, 66, is a regular reader who has long stayed away from investing in equities. For her retirement account under the federal Thrift Savings Plan, she put all her contributions in the G fund, which is invested in short-term U.S. Treasury securities.

Kimball’s other retirement

So many people who are either already retired or are close to retirement are worried that they don’t have the time to wait for a recovery in the stock market. savings have all been placed in certificates of deposit (CDs). The Virginia resident said she just couldn’t stomach the rollercoaster ride of investing in stocks or mutual funds. Her hope was for the CDs to produce just enough interest to offset any impact of inflation.

Rates on CDs and money market deposit accounts, which are insured by the Federal Deposit