LOW INTEREST RATES HURT ORDINARY AMERICANS
Here is a story that shows further evidence how low interest rates are hurting ordinary people, not just the rich. This MSN article details how this country’s pensions funds are falling behind and becoming underfunded because they can’t grow with these low rates.
Pensions are owned by lots of regular people who were (and are) lucky enough to work for companies that offer them. With the popularity of 401K plans in recent years, fewer companies offer pensions so they are not in the news too much. But lots of middle income people are living off of them in retirement or are in line to receive a pension when they retire.
Pension funds have to keep up with inflation and need to grow just to be able to be there when people need them. They have fund managers that are in charge of investing the money to get the greatest return they can reasonably get without taking too much risk. One of the big ways pension funds assets are invested is in interest bearing vehicles and these low rates are decimating the funds right now.
People rely on their pensions just like people rely on Social Security. When the best money market rates, cd rates, and other investment type’s rates are so low, it forces pension fund managers to take more risk if they want to grow their funds and make the money they need to keep the funds viable. Adding risk to something that shouldn’t have any is not a good idea and this is a real problem for these fund managers.
Companies aren’t the only ones who have pensions as there are state and local governments that have pensions for their workers too. If these public pensions fall short just because of low interest rates, TAXPAYERS will have to make up the difference. So these low interest rates are hurting us in many ways and can eventually lead to higher taxes in the places where the pension funds are falling short.
One way or another, low interest rates are hurting every American. If you don’t have money earning interest income, it might not be obvious at first how they hurt you. But eventually everyone will feel the consequences of this bad economy and the irresponsible spending and fiscal policies of our elected leaders.
