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Susan Tompor: How saver's can make the best of falling interest rates

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

CDs will still sputter along

The average yield on a one-year certificate of deposit is merely 0.86% -- up slightly from 0.75% a year ago and down from 0.98% in September 2009.

The average yield on a five-year CD is 1.22% -- down from 1.32% a year ago and down from an average 2.23% in early September 2009.

The days of 4% or 5% on a CD are long gone. Even the top-yielding CDs are around 2.4% to nearly 2.6%, according to And the top-yielding five-year CDs are running around 2.5% to 2.6% in most areas.

"Savings rates will not be immune from a series of Fed rate cuts but the top-yielding accounts will remain competitive," McBride said.

For most savers, there is limited appeal to locking in a rate for five years, especially at a rate that may not even keep up with inflation, he said.

In many cases, savers who don't have a good deal of money set aside would be "better off keeping that money in a liquid savings account or shorter maturity CD in case they need the money during an economic downturn," he said.

Retirees may be better off staggering some of their money in some longer-term CDs, short-term CDS and other higher-paying savings accounts.

Some higher CD rates being offered include:

--Marcus by Goldman Sachs has a seven-month, No-Penalty CD that has a rate of 2.25% with a minimum deposit of $500 and no early withdrawal penalty.

--Comerica Bank has an annual percentage yield of 2.25% on a 12-month, fixed-rate CD but that requires a minimum deposit of $10,000 in new money to the bank. The customer also must have or open a new Comerica checking account. The CD account must be opened by Oct. 4. But the offer is subject to change at any time.

Rates keep falling, but keep saving anyway

Unfortunately, some economists say the days of the robust, free-spending consumer could be nearing an end.

Even so, many people may not be prepared for the next recession.

"Consumers rarely see downturns in the economy until they start to lose their jobs, or the stock market takes a dive. Neither are flashing warning signs yet," wrote Scott Anderson, chief economist for the Bank of the West, in a report.

U.S. stock prices overall remained just below recent highs as of early September.

Job growth began slowing somewhat in August, firming up the odds for another quarter-point rate cut in September and possibly raising the chances of another rate cut in October, Anderson said.


Yet Anderson noted that personal savings rates already have come down sharply, dropping to 7.7% in July from a high of 8.8% in February. The personal saving rate is the percentage of disposable income that people save. It's a clue to financial health and consumer behavior.

"In short," he said, "many consumers have been spending beyond their means over the past few quarters."

"Real consumer spending will not be able to maintain its current pace of growth for much longer."

Anderson said his forecast calls for a sharp slowdown in U.S. growth next year with a 40% chance of a recession by the second half of 2020.

We're seeing some pockets of trouble for workers already, too.

U.S.-based employers ramped up the pace of downsizing in August, compared with July, according to Challenger, Gray & Christmas, an outplacement firm.

Companies announced plans in August to cut 53,480 jobs from their payrolls -- up nearly 38% from July's pace.

Many of those cuts are blamed on the trade war, as well as a shakeout in some industries, such as retailing, energy and manufacturing.

The automotive sector has announced 36,148 cuts so far in 2019, the highest eight-month total since 2009 when 128,906 jobs were cut.

Given that outlook, consumers may need to bulk up on their savings to weather any economic storms ahead even as the Fed moves to cut rates.

About The Writer

Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at

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