Tag Archives: interest rates

Are low interest rates punishing savers? Hardly!

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Robb Engen, Boomer & Echo

By Robb Engen, Boomer & Echo

It’s easy to see how savers feel punished in today’s low interest rate environment. You have to look hard to find a daily savings account that pays more than one per cent.

Fixed income investments aren’t much better, with 5-year GICs barely touching 2 per cent. All of this means parking your short-term savings will do little more than keep up with inflation – you’re treading water, at best.

Rates have fallen steadily for a quarter century

We’ve seen a steady decline in rates for the past 25 years – around the time when the Bank of Canada adopted its inflation-control target to preserve the value of money by keeping inflation low, stable, and predictable. In January 1991, the overnight rate was 10.88 per cent, the interest paid on daily savings was 9.66 per cent, and inflation ran at 6.9 per cent. By 2002, the overnight rate fell to 2.25 per cent, daily savings interest dropped to 1 per cent, and inflation held steady at a now familiar 1.4 per cent.

Related: Can you succeed with an all-GIC portfolio?

So should we long for the days when GICs paid 10 per cent or more? Are low rates really  punishing savers? Hardly. Continue Reading…

The new Weekly Wrap: Brighter Life’s top retirement writers; reflections on Encore Careers

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By Jonathan Chevreau

dNEcyrhc_400x400It’s always nice to be recognized, so the Hub is happy to pass on Friday’s announcement by BrighterLife.ca of some of the Top Retirement writers for 2014.

The list includes me and via my Twitter feed, a nod to the Financial Independence Hub. It also notes my affiliation with MoneySense.ca, for whom I am Editor-at-Large.

Last week, Sun Life Financial also announced its list of top Money writers for 2014, which includes the Globe & Mail’s Rob Carrick, and the Toronto Star’s Ellen Roseman.

I’m not sure what exactly the distinction is between Money and Retirement, but I suppose it’s the kind of fine distinction I myself make between Retirement and Financial Independence.

As I remarked on Twitter, there is a little irony about being categorized as a retirement writer, since this site labours to make a distinction between the traditional concept of Retirement and the evolving one of Financial Independence, or Findependence.

Thus far, however, I don’t believe Sun Life has a category for Top Findependence Writers, and I suppose the Hub should take that on itself. We already do in a way: click on our Best Blogs tab for a list of the Plutus award winners. Continue Reading…

Managing Inflation in Retirement

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Roger Wohlner, The Chicago Financial Planner

By Roger Wohlner,

Special to the Financial Independence Hub 

Inflation may seem like a tame or even non-existent threat. We are actually witnessing deflation in the price of oil and other commodities as I write this. Even so, it’s highly unlikely that inflation is dead. The U.S. economy continues to recover from the financial crisis and times of economic recovery are often a trigger for higher inflation.

An annual inflation rate of 2 per cent or 3 per cent over a period of years can seriously erode the purchasing power of your retirement nest egg.  At 2.5 per cent inflation, US$1 today will be worth approximately 78 cents in 10 years, 61 cents in 20 years, and 48 cents in 30 years. This could have a major impact on those entering retirement and those already in retirement.

Managing inflation in retirement is crucial;  here are some thoughts you need to consider. Continue Reading…

Ominous trend in Millennials’ use of credit cards

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Here’s my latest MoneySense blog, which looks at what I perceive to be a developing problem in the abuse of credit cards by a few Millennials with whom I am acquainted. I name no names but the guilty know who they are! More’s the pity, because the book Findependence Day starts with an opening scene built around a young couple’s similar credit-card problem!

For archival one-stop-shopping purposes and convenience, here’s the original version:

Young Woman on a Shopping SpreeBy Jonathan Chevreau

With some reluctance, I feel compelled to return to the age-old topic of excessive credit-card debt. I do so because lately I’ve had chats with some of my nephews and nieces, all in the age range of 23 to 24. These kids have now all graduated from university or community college, have made a first stab at being in the workforce, and have already racked up what I consider to be excessive credit-card debt. Continue Reading…

Expect mortgage price war to be sparked by today’s interest-rate cut

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Romana King (MoneySense.ca)

Good news for homeowners today with the surprise announcement interest rates in Canada are being cut by 0.25% (to 0.75%).

In her MoneySense.ca column today, real estate columnist Romana King predicts there will be an imminent price war among financial institutions offering home mortgages.

That can only be good for those renewing mortgages or about to buy their first home. One of the charts Romana describes shows five-year fixed rates could even fall below 5%.

Of course, as someone who preaches that the foundation of Financial Independence is a paid-for home, I’d still rather have no mortgage at all. But rock-bottom rates are the next best thing and it seems they will continue for as long as the eye can see.

My only caveat: be wary of buying more house than you really need. Use the gift of continued low rates as a way to accelerate the paydown of your mortgage.  Because ultimately we value Financial Independence more than having a monster home in which to store more “stuff.” Don’t we?

As I say in my book, “Freedom, Not Stuff!”