Senior Financial Planning

How to overcome low interest rates on savings

To help stimulate the economy once it sank into a recession, the Federal Reserve lowered the rate banks pay to borrow money. While this made it easier for consumers to get loans, it unfortunately lowered interest rates on savings accounts like long-term certificates of deposit (CDs) and money market accounts. This has made retirement financial planning a bit more difficult for baby boomers, but according to AARP there are ways around this new obstacle.

Interest rates on savings accounts that were once hovering around 4.5 percent have dropped to almost zero, and as a result a number of people have decided to switch to credit unions. The non-profit organizations are more likely to offer better rates and 78 percent of credit unions don't charge a monthly fee for checking accounts.

"With some elbow grease you can earn a percentage point or two on your cash," Greg McBride, a senior financial analyst at Bankrate.com, told AARP.

With the uncertainty surrounding savings accounts, soon-to-be retirees may want to focus on their investment strategy instead. Experts at AARP say that turning one's attention toward dividend-paying stocks may be a good idea. Specifically, this can help combat the growing threat of inflation because the regular payouts will add some future stability to the cash and savings a person has already accumulated.

Another way to accumulate more funds in retirement is through life settlements. This method is especially helpful to people who have an unnecessary life insurance policy. A life settlement will pay them a portion of the face value, which will provide some financial security that can survive the ebb and flow of the stock market.