War on savings continues: bank fees and zero rates

Bank fees and ultra low interest rates continue to hit US savers hard. Bloomberg has the story in, “Savers Pay Banks to Keep Cash as Rates Dip, Fees Rise”:

It’s getting tougher for U.S. savers to find a bank where they won’t end up paying to keep their money safe.

The average interest paid on savings, checking, money-market and certificate of deposit accounts fell to 0.99 percent in July, the first dip below 1 percent in a decade, according to researcher Market Rates Insight. Banks also have been raising fees and adding new ones, most recently in response to the financial-services overhaul bill that became law July 21.

The result is that an increasing number of savers are seeing their deposit earnings eaten up by charges. That’s frustrating people like Ken Ward, who recently passed on a savings account with a 0.01 percent interest rate at the Chase bank branch near his home in Wantagh, New York…”

As if years of hyper-spending and living beyond our means consumption haven’t hurt the average American family’s balance sheet enough, we continue to struggle through a period in which near zero rates and real world inflation take their toll on savers.

Here’s an interesting (and depressing) little fact from Tradefast: “if you need/want $100,000 of income in retirement, you only need to buy $26.7 million of US Treasury 2 year notes to reach your goal“.

Of course, if you go out 10 years at 2.51% (current yield on 10 year US Treasury), you’ll probably only need about $4 million worth of Treasury bonds to reach the same income goal.

It’s interesting to note that many retail investors seem to have abandoned the stock market over the past 30 months, taking $209 billion out of domestic stock funds while $559 billion flowed into bond funds during that time. If these ultra low rates can’t spur investors into the stock market, it seems that nothing (short of an incredible, longer-term rally) can.

One of the big investing themes in recent months has been the search for yield, as US savers and investors reach to grab any interest income that they can. Meanwhile, as mainstream news outlets tout vehicles such as junk bond funds and ETFs to yield starved investors, onlookers such as John Rubino warn this trend will only end badly for savers and investors.

Low to negative real interest rates continue to greet savers and investors; it seems the war on thrift and savings continues unabated.

Related articles and posts:

1. The Low-Interest Rate Trap – Dollar Collapse.

2. Investors Shake Up Funds w/ Record Bond Love Affair – Bloomberg.