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

bloomberg.com

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

#31

Post by PopAlongKid »

votepaunchy wrote: post #19
PopAlongKid wrote: post #8

Earlier quoted context omitted.

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.

Yes, there is before-tax yield and after-tax yield. Tax rates are at historic lows right now and unlikely to stay that way long term (current rate cuts expire after 2025). Since tax applies to all kinds of income, I'm not sure why it should be a big factor in this discussion any more than it is in discussions of crypto, tech salaries, etc.

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

#32

Post by gruez »

mooreds wrote: post #3
downrightmike wrote: post #2

Consumers have been beaten down an now don't expect interest on savings account to amount to much. There are a small group that chase the limited time 5% offers, but like all corps, banks are taking that margin for profits.

For now. Hopefully competition will come to savings accounts eventually. Wouldn't expect the rate to ever beat inflation, though, since it is risk free (thanks FDIC!).

>For now. Hopefully competition will come to savings accounts eventually.

Looks like it's already here? According to one site[1], there are several banks offering above 0.6% interest.

[1] https://www.bankrate.com/banking/savings/best-high-yield-int...

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

#33

Post by incomingpain »

FooBarBizBazz wrote: post #7
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%.…

Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could.

>Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could.

Lets say we climb to 15% inflation and subsequently interest rates. Who can afford to pay 150,000$/year on a million $ home? Literally nobody.

The boomer selling the home suddenly cant sell their home for a million. It will have to drop in order to spend that $. That retirement fund is suddenly looking weaker.

Generational wealth is a remarkable field that we don't know anything about. We do know inheritance taxes are absolutely destructive to economies, but 1 generation can't in debt another in order to retire. Soon as you retire, I saw that I will now only work for much much more than you can afford on your fixed income.

The system is understanding this. There's a reason why real yields are negative. Hell Switzerland is -0.75% interest rates. Denmark -0.6%. Japan -0.1%. Most of the west is at 0% or recently increased.

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

#34

Post by kube-system »

ragingrobot wrote: post #27

Right before the 2008 downturn, I had an ING Direct (now Capital One) savings account, at that time with an APR over 8. At once point in the early 2000s it was doing a hell of a lot better than that. It never recovered. I never saw that rate go above 1% ever since.

A lot of other online banks did the same. They were essentially paying to acquire customers. 8% was not a typical interest rate in savings accounts at that time.

Not unlike promotional rates at other types of subscription-like businesses that offer great rates to pull you in, hoping you’ll stay after the promotional period ends because of the inconvenience of switching.

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

#35

Post by ra7 »

JumpCrisscross wrote: post #25
ra7 wrote: post #13

Earlier quoted context omitted.

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.

> If you’re saving up more money (for buying a house etc), a savings account is still the best bet Open a TreasuryDirect account and buy bills, currently yielding about 50 bps for 4 weeks [1]. Or search out a high-yield online (FDIC insured) savings account, presently paying up to 80 bps [2]. [1] https://www.treasurydirect.gov/instit/annceresult/annceresul... [2] https://www.bankrate.com/banking/savings/best-high-yie…

Thanks for the recommendation! I’ve never bought bills, I will check it out. I use Marcus savings which just increased its rate from 50 bps to 60 bps yesterday.

(PS: I always search for your comments in any finance-related threads as I learn a lot from them. Just an appreciation!)

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

#36

Post by JumpCrisscross »

ra7 wrote: post #35
JumpCrisscross wrote: post #25

Earlier quoted context omitted.

> If you’re saving up more money (for buying a house etc), a savings account is still the best bet Open a TreasuryDirect account and buy bills, currently yielding about 50 bps for 4 weeks [1]. Or search out a high-yield online (FDIC insured) savings account, presently paying up to 80 bps [2]. [1] https://www.treasurydirect.gov/instit/annceresult/annceresul... [2] https://www.bankrate.com/banking/savings/best-high-yie…

Thanks for the recommendation! I’ve never bought bills, I will check it out. I use Marcus savings which just increased its rate from 50 bps to 60 bps yesterday. (PS: I always search for your comments in any finance-related threads as I learn a lot from them. Just an appreciation!)

Thanks!

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

#37

Post by PopAlongKid »

gruez wrote: post #26
PopAlongKid wrote: post #24

Earlier quoted context omitted.

For most of the last decade, IRS statutory rate for underpayment/overpayment of tax was 3%, an historically low number. It briefly spiked up to 6% in 2019, then fell back to 3% for a while, but last quarter went back up to 4%, with more increases expected.[0] This rate applies to anyone who takes "too long" to claim a refund or pay a tax liability, so it is basically a zero-risk rate that applies to everyone regardle…

>This rate applies to anyone who takes "too long" to claim a refund or pay a tax liability, so it is basically a zero-risk rate that applies to everyone regardless of their credit status. Yeah but you're severely limited in how much money you can "save" in this account. Similarly, it's like arguing that rates are super high because you can get I-bonds at 7.12%, but neglecting to mention the most you can buy per year…

I wasn't really suggesting it as a savings vehicle, rather I was contrasting how a neutral government rate is going up significantly while banks are still stubbornly sticking to their artificially low savings rates.

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

#38

Post by jzig »

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...

So better to park money in TIPs or in Bills from your other comment?

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

#39

Post by JumpCrisscross »

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)

> Clickbait title

It's a (granted, well deserved) PR piece for Goldman Sachs. Their "popular consumer bank Marcus" is called out early for "offering individuals a yield in excess of 2%" in 2019. Its 50 bps is then compared to "Bank of America Corp.’s 0.04% or JPMorgan Chase & Co.’s 0.02%."

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

#40

Post by azth »

Serious question: inflation seems to only be getting higher (is it 8%+ now?) the Fed's increasing of the interest rate is causing a stock market crash. So if one puts their money into assets, those are decreasing in price due to the fed, and if someone is holding cash that's also going down in value due to inflation. What's the solution?
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