Seniors Finance - Keeping Your Principal Safe

There are a great number of senior citizens who have for the most part all of their retirement portfolios in interest bearing certificates of various kinds. Some may have Treasury Bills, Certificates of Deposit or Government National Mortgage certificates while others may tend toward Money Market accounts, AAA corporate bonds and the like. For the most part seniors tend toward these kinds of investments because they are considered safe and secure and for the most part don't tend to fluctuate in value as other investments can tend to.

A large amount of these investments were bought quite some time ago and due to that many are coming to maturity or are being called. When a bond matures or is called (meaning the debtor would prefer to pay it off sooner than the original maturity date) it is then paid off by the debtor to the person who bought the bond originally being the creditor. Once this transaction has taken place, the creditor has in their account a large amount of money to be used toward future investments, and it is at this point that rash decisions can destroy carefully laid financial plans.

Many senior citizens are in a less than enviable position financially, even if they own their own homes. For instance if Bill Withers has a $100,000 CD in his bond portfolio he will have been seeing an income of about $5,000 to $6,000 per year in interest income. When this is added to his Social Security then he has a workable living allowance, but only just. Moreover this is assuming that he owns his own home, which in this day and age is becoming less common.

Due to various different elements one of which being the slowing economy, the Federal Reserve Board has lowered interest rates ten times just this year. Common economic theory would dictate that this would supposedly stimulate the economy by encouraging businesses to borrow more money in order to expand. Unfortunately, many of these companies have plant and equipment standing idle so they don't need to or want to borrow even at these low rates. Obviously they will refinance their debts yet that is not going to create the results the Federal Reserve Board wants.