WHY ARE INTEREST RATES SO LOW?

Dear IRA Investor,

Last evening I was talking to a client who asked me “Why are Interest Rates so Low”? She was speaking of her IRA accounts at two local banks. It was a great question. “Are the banks making so little money that they cannot afford to pay more she wondered?” If I went to the same bank or any bank for that matter and borrowed money for a mortgage would the rate be 1 percent or even 2 percent? If I went in and borrowed money on a new car loan would it be 2 percent? If I got a credit card from the same bank and carried a balance would it be 2 or even 3 percent? I don't think so. I mean if they are paying me one percent I don't mind them making a percent or even 2 percent. “So where is all that extra interest going” she asked.

I took the time to look at BankRate.com. I didn't see any bank or lending institution making car loans handing out mortgages or charging 2 percent when they issue a credit card. “She was right where is all the money?” When I averaged the rates charged on home and commercial mortgages , a new and used car loan, and with the rates they charge on credit cards I could see some banks making double digits. Double digits when they loan us money. But paying us 1% when we loan them money? So why can't they pay us more?

Now I know in the real world the accounts are insured. And if I loaned you money on your home the loan would not be insured (secured by your home but not insured). And sure, there are all those bank buildings to pay for and the salaries for the employees. And even though we bank online (no retail locations in cyberspace) the programmers have to get paid. But what about those people using there phones to take pictures of checks to make their deposits. That has got to save money, right? So who is getting all that extra interest?

It makes me wonder how much money does all that really cost? I mean if the bank has a billion dollars on deposit (which would be a small bank) and they made 10 percent that's a hundred million dollars. And once my account is open all I get is a statement (of course I have to print it myself). Then they get all those bank fees. If you do the math, they really should be paying us more than 1 percent when we loan them our IRA money. So why can't they pay us more?

Wait a minute! Most tellers don't work full time. Many across the nation don't get benefits. Wouldn't that mean less expenses? So is it the shareholders or top tier management getting the dough? All I know is that it's not us. And if we are there for the FDIC insurance then that is some pretty pricey insurance. Like 9 percent.

So why are interest rates so low?

Because we accept them. As long as we loan them our IRA accounts at 1 percent they will pay one percent. It won't be until the large numbers of IRA account holders refuse to lend the banks IRA money at such low rates will they be forced to pay more.

The good news is you and I DO have a choice, there is a solution. Simply cut out the middle man and get the higher rates on all your IRA accounts. In other words “Which way for your IRA?

The decision is yours...Call me when you decide.

Yours truly,

Steve

PS. It's time to cut out the middle man and get the IRA rates and retirement income you deserve. The first 10 callers also get a FREE Financial Review ...Talk to you soon...Steve

Steven K. Woodard Sr. ** Financial Planner

Morganwood Ltd. 1578 S. Kihei Road, Kihei HI 96753

Office 808-875-9887

Email swoodard77@gmail.com