Low Interest Rates Hurt Seniors

Thoughts from a Friend of McHenry County Blog:

The Hidden Income Tax on our Elderly

Dollar flags

Blowing in the wind.

A retired friend of mine said to me recently, in anguish:

“How am I going to live? I did all the right things when I was younger.

“I saved money every year for retirement and I planned on earning just 5% on my money, which is way below what interest rates were historically.

“Now I can barely get 2%!

“How am I going to live?”

I told him

  • that Alan Greenspan and Ben Bernanke had decided to sacrifice our senior citizens to business,
  • that ultra-low interest rates benefited business at the expense of consumers.

And I told him there is another way of looking at the Fed’s policies:

as a hidden income tax.

Suppose you earned just 5% on your savings, which is indeed below the historical average, even if we leave out the high inflation 1970s and 1980s.

And suppose that, after taxes, you had only 1.5% left.

What would that make the federal income tax rate?

Answer: 70%.

But in the current environment, because of the Fed’s policies, you are lucky to earn even 2% on your savings, and, after taxes, you are left with 1.5%.

So, is your income tax rate 25%, or is it really 70%?

The answer is that low interest rates are a hidden 70% tax on the income of our senior citizens.


Low Interest Rates Hurt Seniors — 14 Comments

  1. AARP should push for an end to the fed.

    Or talk to a good advisor.

    There are low risk funds out there earning more than 2%

  2. Aarp is so progressive and anti-American values that I find it very hard to believe anyone would think they are going to do ANYONE any favors.

  3. AARP also was in Obama’s pocket promoting Obamacare.

    They didn’t tell you that they were selected to make millions upon millions as a healthcare provider under the Medicare program….

    I burned my card.

    I’m 70% equities 30% bonds.

    Realized gain last year was 19%. It would have been higher but bonds took it in the rear.

    Sadly people fall victim to banks that pay 1.5 on a CD. If you or your parents are in this situation they need to find a no load fund company such as Fidelity or Vanguard and get their money working.

    In today’s economy, you can not rely on CDs, Money Markets or Treasury investments.

    afe, but sadly it is negative when inflation is added

  4. This is why we need to look at local governments and figure out how to reduce the spending and shrink the budgets.

    This cannot just happen at the county level but also at the township and village levels of government as well.

    We have so many taxing bodies in Illinois.

    There is a reason we are in trouble.

    We simply cannot keep raising levies with our townships, road districts, school boards, library boards, fire protection districts, park districts, ect.

    Instead of an increase we should pledge to shrink the budgets of all governments by 1 percent.

    Can anyone honestly say all of our local governments are so efficient and are so streamlined that they cannot reduce their budgets by 1% for FY15?

    We can if our elected officials want to.

    Andrew Gasser

    PS I want to.

  5. So, play by the rules, pay your taxes , and get rear ended anyway,

    Is there an answer?

  6. Andrew, with respect, the #1 problem is pensions.

    Madigan, Cullerton, et al, have ruined the State of Illinois.

    Townships, for the most part, do their jobs.

    Let us get real, Cook county is the problem, under total control of the democrats, and they control the entire state.

  7. When the great community of Crystal Lake has 2 major employers leave the state, over the much derided income/business tax increase (temporary) gifted on us by the Democrats, we have a major disconnect.

    Food Warming moved to Tennessee.

    65,000 sq ft.

    Catalyst moved to Wisconsin.

    They occupied a 100,000 sq. ft building.

    Both governors wined and dined the owners of these profitable companies.

    Pat Quinn could not have cared less.

    This real.

    This deals with real working people. These are voters.

  8. Keep voting for people like Jack Franks who give people like Madigan the power and you can remain in the “bent over” position!

    It is the voters who vote who keep these people in power. It is the people who DO NOT vote who help keep them there.

    Thanks to current GOP management in McHenry County, Franks frequently runs uncontested.

    Last time he had an opponent, O’Neil had 9,022 votes in the primary while Franks had 3,684.

    Rhetorical question: Explain to me why people who vote Republican will switch parties in the General election to elect Franks with 23,429 votes to O’Neil’s 13,222?

    Voters are easily deceived.

    Do Republican voters like how Pam Althoff and Barb Wheeler cozy up to Jack Franks?

    We will find out later this year.

    We do have a courageous person who has stepped forward with NO help from the current GOP.

    Steve Reick needs your money and your community voice to disseminate his message!

    btw Franks touts he has never voted for a tax increase but he sure likes to vote for increases in fees and pension expenses!!

  9. Also, Steve Reick stated a long time ago that his #1 issue is common core, before anyone knew about it.

    Now, with the horrid facts about how bad common core is being out in the open, this is very important.

    Common core is worse than Obamacare.

    It is brainwashing, dumbing down our children and grandchildren, and distorting history.

    Check out http://www.stopcommoncoreillinois.org

  10. No doubt pensions are a problem.

    However, I would also remind everyone that McHenry County is the 29th most taxed county in the United States.

    This is simply unacceptable.

    To be blunt – we have very little control on what happens in Springfield.

    We elect people like Duffy and McSweeney and we elect people like Althoff and Franks.

    However, what I do say is that we can control what happens in our townships, our villages, and in Woodstock.

    We need to clean up our own backyard before we do anything else.

    Just my opinion.

  11. Andrew: Just why do we elect people like Franks?

    Last time I checked the Townships and the County are not in significant debt!

    Some Townships have actually reduced their spending!!!

    Number one goal for people in the 63rd should be to get rid of Franks and get more conservative replacements for Wheeler and Althoff!

    Springfield is where the laws are made relative to increased taxing rates in PTELL counties!!

    For Althoff to even attach her name to a bill which could potentially increase property taxes is unconscionable!!

  12. Numbersguy,in the real world people have to work together.

    Working together is not cozying up it’s finding common ground where you can work on shared values.

    Althoff is a good legislator and Wheeler is proving herself to be effective given the circumstances in Springfield.

    More conservative candidates are not the solution (and frankly no one is much farther to the right than Wheeler) and beating Franks is not the solution.

    Attempting to do so with Steve Reich is a fools errand.

    Perhaps those of limited mental capacity should consider this- maybe Franks keeps winning because he represents the views of his constituency???!!!

    Mr Gasser… With all due respect its difficult to evaluate Althoff and Wheeler separate from Duffy and McSweeny because in the case of all four they are in the superminority.

    Other than giving great speeches Duffy has accomplished little other than to prove he cannot work with others.

    McSweeny has dine little more but has shown a penchant to be a bit more politically savvy (supporting Cross) and has a distate for local government and a preference for strong central control.

  13. The economy is between a rock and a hard place.

    This article provides a unique criticism of low interest rates that I had not heard before.

    On the other hand, raising interest rates would likely damage the already anemic economy.

    Volcker raised interest rates at the beginning of the Reagan administration to get inflation under control and the economy crashed.

    Janet Yellen just confirmed, within the last week, that she would not be raising rates because unemployment is too high. (By the way, my last bank gave an interest rate of about 1/20th of one percent. Best bet: diversify.)

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