Sorry, savers: Interest rates set record lows

— -- Interest rates hit another all-time low Monday, which is great news for borrowers but keeps savers in the land of no returns.

The bellwether 10-year Treasury note yielded 1.46% Monday and went as low as 1.44% in intraday trading. Bond traders push rates down when they think the economy is slowing and inflation is unlikely.

Rates on 30-year fixed mortgages closely follow the 10-year T-note yield. On Thursday, the average mortgage rate fell to a record low of 3.56%, according to mortgage giant Freddie Mac.

"Lower interest rates help in finances, and enabled us to purchase our future retirement home, but will probably affect us more in retirement," says Mary Fletcher of Cumming, Ga.

The Federal Reserve pushed its key fed funds rate to zero from 3.5% in 2008. Most savings rates track the fed funds rate.

Money funds yield an average 0.03%. The highest-yielding one-year bank CD, from CIT bank, yields 1.1%, says Bankrate.com — $5,500 a year from a $500,000 deposit.

"The fact that my savings are sitting in a money market fund doing next to nothing certainly impacts my comfort level in terms of when and where I will retire," says Bill Mack, a student aid counselor in Allen, Texas.

As recently as July 2007, savers could get a 5%, five-year CD says Bankrate.com. As those CDs mature, seniors have to accept lower rates. "They're afraid, forced to dip into principal, and very concerned about running out of their cash," says Ronald Fatoullah, a New York elder law attorney.

And rightly so, says Wesley Wright, a member of the National Academy of Elder Law Attorneys in Bellaire, Texas. "Many elderly cannot work anymore, and they have built up a nest egg that cannot be replaced."

To get more income, some elderly have been pushed into riskier investments, such as stocks, to get higher yields. "I'm personally fearful for older clients to invest in this market," he says. "It could tank," Fatoullah says.

Others have brokers sell them annuities that are completely unsuitable, Wright says.

But even those who don't live off their savings aren't happy with low interest rates. "I walk by a bank on every street corner, and when I look at those low rates, they don't even look like real numbers," says Melissa Daly, owner of MFD Communications. "When I look at CD rates, I don't see the benefit of ever getting one," she says.