U.S. interest rates have soared everywhere but savings accounts • Hacker News Board

Re: U.S. interest rates have soared everywhere but savings accounts

#11

Post by incomingpain » Sat, Apr 23, 2022, 3:26 PM UTC

PopAlongKid wrote: post #9

incomingpain wrote: post #5

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%.…

>Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. Only if your income goes up 8% a year due to inflation.

>Only if your income goes up 8% a year due to inflation.

Those inflation numbers are still rising. However, who will ultimately be able to find a new job and increase their $? Not retirees obviously.

Re: U.S. interest rates have soared everywhere but savings accounts

#12

Post by PopAlongKid » Sat, Apr 23, 2022, 3:28 PM UTC

incomingpain wrote: post #5

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%.…

>wealth transfers from retirees to a lower generation. Primarily Boomer -> Millennial.

The millenials are the children of the boomers, so if inflation accelerates the transfer of wealth, it just means the inheritances will be worth less. Meanwhile, the Social Security/Medicare gravy train rolls along for now, transferring some wealth back in the other direction.

Re: U.S. interest rates have soared everywhere but savings accounts

#13

Post by ra7 » Sat, Apr 23, 2022, 3:29 PM UTC

hsnewman wrote: post #6

Just go for I-Bonds instead.

The $10k limit makes I-Bonds mostly suitable for parking emergency funds. If you’re saving up more money (for buying a house etc), a savings account is still the best bet. I’m in this position and the interest rates are frustrating, but everything else is very risky IMO.

Re: U.S. interest rates have soared everywhere but savings accounts

#14

Post by JumpCrisscross » Sat, Apr 23, 2022, 3:33 PM UTC

hsnewman wrote: post #6

Just go for I-Bonds instead.

> go for I-Bonds instead

Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap.

[1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo...

[2] https://www.treasurydirect.gov/instit/annceresult/annceresul...

Re: U.S. interest rates have soared everywhere but savings accounts

#15

Post by bushbaba » Sat, Apr 23, 2022, 3:34 PM UTC

incomingpain wrote: post #5

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%.…

Except boomers also own a large portion of housing and stocks. The boomer generation benefited the most from the Fed's money-printing.

Re: U.S. interest rates have soared everywhere but savings accounts

#16

Post by redisman » Sat, Apr 23, 2022, 3:34 PM UTC

JumpCrisscross wrote: post #14

hsnewman wrote: post #6

Just go for I-Bonds instead.

> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresul...

Savings accounts are effectively giving you -8% right now

Re: U.S. interest rates have soared everywhere but savings accounts

#17

Post by gotaquestion » Sat, Apr 23, 2022, 3:35 PM UTC

Rastonbury wrote: post #10

Clickbait title, the fed rate went from 0.25% to 0.5% hardly soaring. Savings accounts previously paid like 0.04% according to article, that's because they need margin and they can keep them low cuz people won't swap banks for half a percent (not that it'll get there anytime soon)

Doubling equals soaring in anything related to economics or finance.

Re: U.S. interest rates have soared everywhere but savings accounts

#18

Post by JumpCrisscross » Sat, Apr 23, 2022, 3:39 PM UTC

redisman wrote: post #16

JumpCrisscross wrote: post #14

Earlier quoted context omitted.

> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresul...

Savings accounts are effectively giving you -8% right now

> Savings accounts are effectively giving you -8% right now

Savings accounts have always been of dubious value for preserving or accruing value.

Re: U.S. interest rates have soared everywhere but savings accounts

#19

Post by votepaunchy » Sat, Apr 23, 2022, 3:39 PM UTC

PopAlongKid wrote: post #8

hsnewman wrote: post #6

Just go for I-Bonds instead.

Yes, these are becoming more popular. Unfortunately, there is an annual purchase limit that is pretty low ($10K per person plus maybe an extra $5K if you can use a large income tax refund). There was a time not that many years ago (15?) where I was actually earning higher interest in a bank CD than I was paying on my mortgage. I was also able to get short term cash advance at low introductory rate on a credit card, l…

Interest is taxed as income. Debt does not cancel out income unless paid on a mortgage when itemizing deductions.

Re: U.S. interest rates have soared everywhere but savings accounts

#20

Post by CameronNemo » Sat, Apr 23, 2022, 3:40 PM UTC

JumpCrisscross wrote: post #14

hsnewman wrote: post #6

Just go for I-Bonds instead.

> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresul...

Actually Series I bonds are negative real yield because the interest is taxed federally.