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Money questions

Savers fret lower interest rates

We asked: Are lower interest rates good or bad for you and the economy?

Lower interest rates have a depressing effect on retirees who depend heavily on interest income from their investments. A reduction of 2 percent in the interest rate can mean a loss of thousands of dollars in annual income, thus cutting down on travel, discretionary purchases, including entertainment, thus putting a dent in the retail
economy.

Eric Rhodes, New Port Richey

Lower interest rates are bad
for me, personally, but good for businesses making capital expenditures, students seeking college financing and home
buyers and sellers.

Lindsay Myers, St. Petersburg

I am no longer getting top dollar for my invested bucks. As a result, I am more guarded as to how I spend my money, which isn't helping stimulate the economy.

JoAnn Lee Frank, Clearwater

Lower interest rates are good for us. We have a home-equity line of credit at prime rate, and it has dropped 2.25 points since last year, meaning more than $20 per $1,000 saved in interest per year.

Lamar Sprouse, Weeki Wachee

Lower rates are helpful to stimulate this sluggish economy. I have no debt, so the impact of lower interest rates on my personal finances is probably much less than average.

Adrian Nenu, St. Petersburg

You asked

Our H savings bonds reach final maturity in July. There is a taxable interest amount shown on the face of each bond. How is this reported to the IRS? Must the bonds be redeemed at one time?

The deferred interest
shown on your bonds is
taxable when the bonds are redeemed or they reach maturity, whichever comes first. Delaying redemption would mean you would not be earning any interest on the money but you would owe the taxes.
You report the deferred
interest on your 2008 tax return.

Since the Fed seems intent on sucking the life out of
my savings by lowering interest rates to zero, at what point is it not worth the risk to let a bank have it? It seems that at 1 percent interest, banks are likely to get a run on the money. So shouldn't I transfer funds into a safe storage location, such as a safe deposit
box for the short term?

I don't see it ever being worthwhile to keep cash in a safe deposit box. Keep your money in a well-capitalized bank or credit union and keep it within deposit insurance limits.

I don't think the government is going to back away from deposit insurance, and a safe deposit box isn't going to protect you from inflation or the decline in the value of the dollar.

Next week's question

How high do gas prices have to go before you'll
cut back on your driving?
Or have you?

To ask a question, make a comment or answer the Money Question of Week, e-mail hhuntley@sptimes.com or write Helen Huntley, PO Box 1121, St. Petersburg, FL 33731. Visit her MoneyTalk blog (blogs.tampabay.com/money) for more money information.

Savers fret lower interest rates 03/22/08 [Last modified: Monday, March 24, 2008 2:24pm]

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