Savings Accounts and Why They Won’t Make You Rich

Every year we get sent some Social Security paper work, showing how much we have paid into the system and how much we would get if disabled or an estimate on retirement. However, one of the charts bugged me a bit.

growth in savings
The note that says “assuming a 5% annual rate of return” is out of date. Interest rates on Savings or Money Market accounts haven’t been 5% for well over two decades. Even CDs haven’t been 5% for over 5 years. And do you really think that in 40yrs that $300,000 is going to be enough to retire on (especially with inflation)? But not only that the US Government taxes you on the interest you earn every year anyway, which isn’t even mentioned.

Even if you save more money each year, interest on savings accounts have not been over 1.5% since the 1990s. The interest rates have been so low for so long people think .02% is 2% and it’s not. Which makes me wonder why people even use big banks when Credit Unions generally give better interest rates and don’t have as many fees. Although the only banks to offer even about 1% right now for Savings are online banks.

Leave a Comment

Comments are reviewed before publishing to prevent spam.