Senior citizens are highly vulnerable to low interest rates on highly-liquid accounts. While most savvy retirees carefully mix stocks, bonds, certificates of deposit and low-interest savings and checking accounts to achieve some growth without sacrificing ease of withdrawal, as savings account and certificate of deposit rates crawl down to near-zero rates, the average retiree feels the squeeze. Add inflation rates that outpace savings interest rates and ever-increasing health care costs and senior citizens who tucked away a targeted amount of capital may worry that they will outlive their money.
The Senior Squeeze
President Obama announced on October 19 that all Social Security recipients will receive their first COLA raise since 2009; the 3.6 percent increase won't touch the ravages of the past two years' inflation, especially in the health care arena, but the raise will add an average of $39 per month to those who receive retirement and disability benefits. That average of $39 is better than nothing, but it won't stop the bleeding. It's a band-aid.
Sites like BankVibe.com track banks and credit unions nationwide to help investors find the best rates. While a hometown bank might offer 1 percent on a 6-month CD, a bank three states away could be offering 1.5 percent, and depending on personal factors, the time and energy to shift funds could be worthwhile. Guerilla frugalists at FatWallet advocate shifting money to chase higher rates, zeroing in on high-interest checking accounts that combine a requirement of direct deposit, minimum balance and a specified number of debit card transactions per month in order to receive 2% or more.
HIgh Yield Reward Checking
These high-interest checking and savings accounts do require some monitoring. If your account requires 12 debit card transactions per month to receive a 2.4 percent interest rate, get those 12 transactions in during a defined "month," which may not be 30 days, or a calendar month.
The three top options with these high-interest checking accounts nationwide are:
- Consumers Credit Union of Illinois (4.09 percent)
- Lake Michigan Credit Union (3 percent)
- ABCO Federal Credit Union (2.52 percent)
Most banks and credit unions with high yield rewards checking require a minimum deposit (ranging from $1,000 to $5,000). The high interest rate caps out on balances of $15,000 to $50,000, depending on the financial institution. As the banking sector has felt its own squeeze with legislation that tightens regulations on fees charged to customers, many banks have dropped their high yield programs, but a few persist, like Community Bank of Pleasant Hill and Heritage Bank
Investing in Bank Stocks for Banks with High Yield Reward Checking
If a bank is healthy enough to continue to offer high yield reward checking, then it's a strong bet that they're healthy enough for investment. Consider buying shares of Heritage Bank (HFWA) and Bank of Internet (BOFI), both of which offer high yield rewards checking and which have strong financials.
High interest checking, then, becomes both a short-term strategy for high liquidity and higher "pedestrian" interest earnings, as well as a mode for analyzing bank stock investment. Both strategies help lessen the senior squeeze and give your account balance a little room to breathe.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.