Tag Archives: financial advisor

Can I File and Suspend My Social Security Benefits?

SSA-image-2My Comments: This is a hot topic. No one likes to leave money laying on the table. Given the chance you will live longer than expected and don’t have the financial reserves you thought you might have, taking advantage of everything possible from the Social Security system is critical for many of us.

By Dan Caplinger Published April 10, 2016

Social Security has many complex provisions, and smart retirees have used some of those provisions over the years to create useful strategies to enhance their retirement income. One of those strategies is called file and suspend, and late last year, lawmakers identified the strategy as offering a loophole that they didn’t want to leave open. As a result, the file-and-suspend strategy will disappear soon, but there’s still an opportunity for some people to take advantage of the strategy before it goes away.

How the file-and-suspend strategy works

The idea behind using the file-and-suspend strategy was relatively simple. Under the laws governing Social Security, your spouse isn’t entitled to receive any spousal benefits based on your work history until you decide to file for your own retirement benefits. This isn’t a problem as long as you want to take your benefits now. However, many people would prefer to defer taking retirement benefits until a later date, letting them earn delayed retirement credits and boost their eventual monthly payments.

The file-and-suspend strategy allowed couples to get the best of both worlds. Under the filing part of the strategy, you would file for your benefits, thereby activating spousal benefits for your spouse. However, you would then immediately suspend your retirement benefits. The old rules allowed you to keep earning delayed retirement credits during the period of suspension. The net result was that one spouse could get benefits now, and the other could wait and get larger benefit checks later.

Why the file-and-suspend strategy is going away

Late last fall, lawmakers agreed to do away with the file-and-suspend strategy, characterizing it as an unintended loophole. Once the law goes into effect, if you suspend your benefits, your spouse will no longer be able to get spousal benefits based on your work history. That means that in order to activate spousal benefits, you’ll have to file and actually receive your retirement benefits, and you won’t be able to earn delayed retirement credits once you file.

The law’s effective date was set for six months after its passage. That works out to May 1, and because that’s a Sunday, most planners are recommending that people take action by April 29.

The problem is that you’re not eligible to file and suspend until you reach full retirement age, which is currently 66. Those who won’t have turned 66 by the late-April deadline therefore won’t have any opportunity to get the benefits of the file-and-suspend strategy.

However, if you are eligible, then you’ll be able to enjoy the advantages of filing and suspending even after the effective date of the law. Grandfathering provisions will allow your spouse to receive spousal benefits even if you’ve suspended your benefits — as long as you did so before the deadline. If you decide to unsuspend your benefits after the deadline, then that’s a one-time decision, and you won’t be able to unmake it.

What you can still use file and suspend for

Even after the new law takes effect, there are still situations in which filing and suspending benefits can make sense. The most common is if you filed for early benefits and later decide that you would prefer to have largely monthly payments, you can suspend those benefits once you reach full retirement age. You can then earn delayed retirement credits that will boost your benefit when you decide to start taking it again. Given that many people regret their decision to take early Social Security, this is an option that has some value.

Still, the main reason why most people used file and suspend will no longer work once May comes. At that point, the strategy will simply be the latest in a series of things people did to enhance their retirement income.

A Chilling Message About The Stock Market

roller coasterMy Comments: This is about something called an IPO. For the uninitiated, this is an Initial Public Offering. It’s when a company, new or old, attempts to raise capital by offering shares representing an ownership interest to the general public. It’s like a giant, global auction. It’s not the final bid that determines how much money the company will raise, but what happens next. The problem right now is there aren’t many IPOs which suggests a lot of reservations about the short term financial future.

by Wold Richter, April 2, 2016

A stock market that has rallied sharply to ludicrous valuations is normally accompanied by a booming IPO market. They’re like twins. The S&P 500 jumped 13.5% in seven weeks – to bring it back up to flat year-to-date, a lofty perch, though down a smidgen from its all-time high in May 2015. But year-to-date, the IPO market is in the worst shape since 2009. Something has to give.

“Either the IPO market is going to pick up, or the stock market is going to pull back, but it’s hard to envision both conditions peacefully coexisting,” Jack Ablin, chief investment officer at BMO Private Bank told the Wall Street Journal.

In the US, only 8 IPOs made it through the window in the first quarter, according to Renaissance Capital’s Quarterly IPO Review, dated March 31. They were all early-stage medical device or biotech companies. Two from China. Not a single one has a product or revenues.

Also three blank-check companies made it out the gate, with the idea of buying up assets as they become available, but Renaissance Capital did not include them in the above tally. The Wall Street Journal pegged the total number of IPOs at 9, including the three blank check companies but excluding the two China-based outfits, which are already publicly traded elsewhere.

This was the lowest number of IPOs since 2009. And the total amount raised – $1.2 billion for all of them – was the smallest in 20 years. Another 9 IPOs got postponed at the last minute, and one was withdrawn altogether. No Tech IPOs at all.

It was the first quarter without any private-equity backed IPOs since Q1 2009. PE firms had loaded up on Leverage Buy Outs or LBOs before the financial crisis. After years of booming stocks, they thought it would be a good time to unload. Some did in 2014 and 2015. Most of those struggled. And this year? Renaissance Capital.

The last LBO to go public was KKR’s payment processor First Data in October 2015; since then, it has vastly underperformed its peers. A spate of large PE-backed IPOs have waited in the pipeline since the 2H15, including Albertsons, Neiman Marcus, Univision and Laureate Education.

Another big-name LBO queen waiting in the wings is US Foods Holding Corp. But for now, PE firms seem to be stuck with their LBOs.

During the quarter, when the S&P 500 index was about flat, the Renaissance Capital IPO index fell 7%. Not exactly an enticing environment.

One of the problems pre-IPO companies face is their mega-inflated “valuation,” the infamous “unicorn” syndrome where startups have to be valued at $1 billion or more, by hook or crook, to where even SEC Chair Mary Jo White made it a point yesterday to come out to Silicon Valley herself and warn power brokers and money gurus about “fraud” in these valuations that not only hits employees and others that end up with these shares directly or indirectly, but also filters through institutions to retail investors.

“The concern is whether the prestige associated with reaching a sky high valuation fast drives companies to try to appear more valuable than they actually are,” she said at one point. No kidding. The SEC is watching out for us – after the damage has already been done.

So to get out the IPO window, some companies had to discount the “valuation” they had as a private company. Square, which had a valuation of $6 billion as a private company, went public at half that last year. Despite doubling since its low in February, including a curious spike over the last few days (what is Wall Street trying to accomplish?), it’s still $1 billion short of its valuation as a private company.

And that kind of valuation markdown – 50% in some cases – is a scary thought for current investors and employees who might see that perceived wealth disappear entirely if they came late to the game.

There are now 42 companies in the IPO pipeline with new or updated filings since January, according to Renaissance Capital, including a gaggle of private-equity backed LBOs and 11 revenue-less biotechs similar to the ones that just wobbled through the gate. But so far it doesn’t look very good for them in the second quarter either.

“It’s kind of unprecedented for the general stock market to be so close to record highs and yet so little IPO activity,” Jay Ritter, professor of finance at the University of Florida, told the Wall Street Journal.

Now everyone is waiting for the icebreaker, that one big company with real revenues and preferably even earnings to pull off a successful IPO. Then everyone else can follow. That’s the meme. So who dares to be next?

On a global basis, the IPO picture was dreary too. Only 167 IPOs made it out the gate, the lowest since 2009, the Financial Times reported. Even worse: 17 IPOs were “scrapped” at the last minute, or 10% of the total, an unheard-of proportion. As in the US, stock market “volatility” got blamed.

But the past seven weeks, markets have been soaring and volatility as measured by the Volatility Index (VIX) has settled back down to historically low levels, and still the IPO drought persists.

So could it be something else?

Turns out, investors don’t seem to believe in the rally. They fear that the rally was the product of a majestic short-covering panic, a classic bear-market rally that traders rode up as far as they could – that it wasn’t in fact the beginning of a new bull market. But a bull market is precisely what it would take to dump these overvalued IPOs on a blindly exuberant public. And the IPO gurus, with all their insights and perspective, don’t seem to see that bull market.

They have their reasons. Not all is rosy. Business revenues and earnings are down, productivity is down. And now layoffs are reaching far beyond energy.

Why You’ll Need to Own More Stocks After You Retire

retirement_roadMy Comments: For many of us, retirement once seemed like a glorious goal to achieve. Now that many of us are here, the light isn’t so bright.

As a financial planner, both for myself and others, the landscape is very different from what it was as little as twenty-five years ago. The fundamentals are the same, but how you get there is very different.

These comments from Ryan Derousseau speak to some of the changes in the landscape.

March 26, 2016 by Ryan Derousseau

Unless you’re already unspeakably rich.

Retirement planners like to relay best practices to clients via simple, easy-to-understand rules. Whether it’s sticking to a 4% yearly withdrawal rate or having your bond exposure match your age, these rules-of-thumb have translated into investing strategies for years now.

Of course, these tips come with plenty of research to back them up – a 4% withdrawal rate has a strong chance of lasting a lifetime, for example. But sometimes these rules get turned upside down.

One rule undergoing such an evolution has to do with stock exposure during retirement. For a long time, conventional wisdom has held that your stock exposure should steadily decline as you age. But a growing number of experts think that today’s retirees need to keep much more of their portfolio in the stock market than they might expect.

In the past, when the typical retirement lasted 10 to 15 years, there wasn’t a huge need for stocks in the portfolio. But, the “retirement time horizon has gone up,” says Stuart Ritter, vice president at T. Rowe Price Investment Services and a financial planner at the firm.

With people living longer, the need to take on the risk of stocks (in return for the potentially greater reward) has increased. Though inflation has been low lately, its threat to the value of your retirement savings grows with greater longevity: While a dollar’s value may not decrease much in a decade, it will decrease a lot over 35 years.

These trends have led a growing number of financial planners to advocate a rising equity “glide path.” While this idea isn’t as easy as others to sum up with a platitude, the basic idea is that your exposure to stocks should increase, rather than decrease, as you age in retirement.

Working with the American Institute for Economic Research, Luke Delorme conducted a study to determine the ideal asset-allocation strategy for retirees, assuming a 4% withdrawal rate. The best strategy, he found, was to begin with a 20% allocation of stocks as you enter retirement at age 65, and then increase that allocation gradually every year, over 30 years, until you have a 70% equity exposure at age 95.

“The time that people need to be most conservative is not in retirement,” says Delorme. “but at the beginning of retirement.”

Here’s why: Your portfolio is most vulnerable to risk right after you retire. If the market takes a tumble during the first few years of your extended vacation, then it’s difficult to rebuild your portfolio without going back to work. So keeping stock exposure low at that point protects you from the potential of losing out in the beginning of retirement. But since stocks have historically risen an average of 7% a year over the long-term, gradually increasing your exposure over time increases your odds that your portfolio will last into your later years.

If you have a pension, you can take a bit more risk, says Delorme, who now works as director of financial planning at American Investment Services. You can have a higher allocation of stocks when you leave the workforce, and you can increase stock exposure to 80% within retirement.

T. Rowe Price’s Ritter explains the glide path concept differently. He places client assets into two buckets – one for the first 15 years of retirement, the other for the second 15. In the “first 15” bucket, assets be concentrated in on safe, short-term investment vehicles like bonds and fixed income. The second 15 years’ worth of savings goes into stocks. Placing clients’ money in the two buckets, Ritter says, “helps put the short term volatility” of the market into the context of a broader strategy; investors who know their short-term needs are taken care of are less likely to get scared and pull money out of the market.

While they may not use the term “rising equity glide path,” more financial planners are latching on to the idea of increasing stock exposure in retirement. You often hear of a 50-50 stock to bond ratio for retirees these days. And if you have a higher withdrawal rate, chances are you will also need to take on more risk (unless your nest egg is truly massive). “The biggest driver is less around the allocation of risk,” says JPMorgan Private Bank’s David Lyon. Instead, it’s based on “how much you’re spending on your balance sheet.”

In other words, if you have expensive tastes, then you may want to get used to living with more risk. That’s not a cliché; it’s life.

Here’s The Big Economic Risk The Federal Reserve Is Willing To Take

world economyMy Comments: In the world of finance, especially here in the US, what the Fed does is a huge determinant of how our lives play out when it comes to our money and purchasing power. People have made and lost fortunes on their expectations of what the Fed will do next.

Here is ‘projection’ about decisions the Fed will make about interest rates, both in the next several months, and in the next few years. What I read here is that lessons have been learned from decisions made over the past few years that didn’t turn out well. But if you have a solid understanding of the variables behind Fed decisions, it will help you better understand much of the political rhetoric we’re going to have to listen to over the next few months.

If it plays out the way this writer describes it, I think it will be good for all of us.

Myles Udland Mar. 19, 2016

The Federal Reserve sent a clear message to markets on Wednesday: We’re going to run this thing hot.

Speaking at a roundtable on Thursday, BlackRock’s Rick Rieder — chief investment officer of global fixed income for the world’s largest asset manager — said the signal out of Wednesday’s meeting was crystal clear.

“There’s a takeaway [from the Fed meeting] that I think is extremely important,” Rider said Thursday.

“The Fed has made the determination that the risks of letting employment and inflation run hotter is the risk they’re willing to take.”

When economists talk about the economy “running hot” relative to the Fed’s forecasts, they’re saying the unemployment rate will fall lower and faster than expected, while prices will rise higher and faster than expected.

Said simply: The Fed is willing to let the economy get almost too good before acting to pare back any excesses.

On Wednesday, the Federal Reserve announced it would keep interest rates pegged in a range of 0.25% to 0.50%.

But the biggest development from the meeting was the Fed’s latest “dot plot” forecast of future rate hikes, which now projects there will be two additional interest-rate hikes in 2016, down from a prior call for four moves.

Based on the Fed’s latest forecasts out Wednesday, the median expectation for the unemployment rate at the end of this year is 4.7%, while “core” PCE — the Fed’s preferred inflation measure, which strips out the more volatile costs of food and gas — is forecast to hit 1.6%.

In January, “core” PCE hit 1.7%. The unemployment rate was at 4.9% as of February.

So: The Fed is (basically) there, which you’d think would argue for more not less action. And yet, they pared back their forecast.

Pantheon Macro’s Ian Shepherdson wrote Wednesday that the Fed’s statement indicated that “wishful thinking appears to have taken the place of reality-based forecasting.”

But the reason for cutting this forecast, in Rieder’s view, is that the Fed thinks an economy that is “too good” can be managed. The other side they can’t work with. (Economists call this the “balance of risks.”)

“The Fed has decided that you can let inflation run hot because you have a multitude of tools at your disposal to bring it down,” Rieder said. “It is a deflationary cycle is where the tools are very challenged.”

“Central banks around the world and monetary policy has pressed so hard to try and avoid deflation that the Fed has made a cognitive decision: Let labor run hotter. Let inflation run hotter, and we can deal with that paradigm as opposed to the other side.”

Now the view that the Fed’s move on Wednesday was decidedly dovish is not an outside one, with economists at Goldman Sachs calling this one of the most dovish announcements this century. (A dovish decision is one that suggests the Fed will keep interest rates low; a hawkish one would imply a quicker trigger on raising rates.)

Rieder also noted that Wednesday’s statement made very clear investors who are watching the Fed need to understand the Fed now has one eye trained on the US economy and one eye focused abroad.

In its statement on Wednesday, the Fed added the phrase, “… global economic and financial developments continued to pose risks.”

This, to Rieder, underscored “the extent to which external economic and financial market stresses can influence Fed policy.”

Said another way: The Fed will not stand alone.

A major theme in markets coming into this year was the apparent diverging policy paths of some of the world’s most important central banks.
The Fed appeared tilted toward tightening policy.

The European Central Bank and the Bank of Japan, meanwhile, aggressively eased policy, with both banks taking rates into negative territory and engaging in massive asset-purchase programs.

Wednesday’s statement, then, made clear that these paths won’t diverge too far.

Read This Before You Take Social Security Benefits

My Comments:Social Security card Social Security is a complicated topic. If you are not yet 70 years old, and/or have not yet committed to how you will take your Social Security benefits, you should read this.

With so many variables, the typical process for making a good decision is total confusion for most people, even financial planners. The net effect is that for many of us, there is money left on the table at the end of the day. This author reduces much of the confusion to simple concepts that are a great starting point. If you are still confused, or have more questions, call me.

By Dan Caplinger Published March 13, 2016

Many retirees rely on Social Security for most or all of their income in retirement. Before you make a decision that will have major financial implications for the rest of your life, it’s important to know everything at stake in the timing of when you take your benefits. Here are a few things to consider.

Fewer big payments vs. more small payments

Most people have what amounts to an eight-year window to claim Social Security. Earliest eligibility is at age 62, and 70 is the latest age at which Social Security provides any financial incentive to wait. The key decision with Social Security is whether to take a reduced benefit that will give you the maximum number of monthly Social Security payments, or whether to wait and take a higher monthly benefit but receive it for a shorter period of time.

You can find plenty of articles discussing the trade-offs involved with claiming at age 62 versus waiting until full retirement age (currently 66) or age 70 to claim. But a lot depends on your individual situation. For instance, single retirees who won’t have anyone else claiming on their work history can look solely at their own personal situation to make a smart decision about when to take Social Security. For those with family members who will receive spousal or survivor benefits, decisions that might make sense solely from your point of view might not be the best for your family as a whole. You can run numbers projecting which choice will result in your receiving more total money.

But only you can make a personal assessment whether the true value of that extra money is worth the trade-off of having to wait for it. The important thing is not just to make a knee-jerk decision but rather to consider all the factors involved and what they mean to you and your life.

If you’re working and claim early, Social Security could take back your benefits anyway

The worst result in many people’s eyes is to start collecting Social Security benefits only to have the government take them away. Yet that’s what happens to some people who continue to work in their early 60s and choose to take early benefits.

If you haven’t yet reached full retirement age, there’s a limit on how much you can earn before Social Security forces you to forfeit benefits. If you will not reach full retirement age this year and earn more than $15,720, then you’ll lose $1 in annual Social Security payments for every $2 above the limit you earn. For those who hit full retirement age during the year, a higher limit of $41,880 applies to earnings before the day of the year you reach full retirement age, and the forfeiture is $1 for every $3 above the limit.

This forfeiture doesn’t result in a complete loss, because the Social Security Administration treats you as if you had delayed taking Social Security for any full month of forfeited benefits. But if that’s what’s going to happen anyway, it can make more sense just to delay filing until your income will be under the threshold — or until you reach full retirement age.

You can get a do-over on your decision, but only for a limited time

Many people regret their decision on when to take Social Security after the fact. There is a way to undo your claiming decision, but you have only a limited time to do so, and there are some key requirements that pose a hardship for many.

In order to get a do-over, you have to use a strategy that’s known as withdrawing your Social Security applications. Form SSA-521 provides for this request, and it provides space for you to indicate the reason for the withdrawal and other related information. You can only file Form SSA-521 once in your lifetime, and it’s only available within the first 12 months after your initial application for Social Security benefits.

The hardest part of the withdrawal application is that if approved, you have to return any money you received from Social Security since you claimed benefits. Many retirees aren’t in a position to pay back up to a year’s worth of Social Security payments, and that can make the strategy impractical for them.

The decision of when to take Social Security is a key one. Being informed is the first step toward making sure you do the best thing for your situation.

The Monetary Madness of Trump, Cruz and Rubio

CharityMy Comments: On its face, this looks like just another political swipe at the remaining presidential hopefuls on the right. However, as an aspiring economist and financial planner, I appreciate the role played by government in the financial sector and know how critical it is. These comments point to some dubious thinking on the part of some candidates.

Tuesday, Mar. 08, 2016 by Christopher Ragan

Anyone watching the U.S. presidential primaries is seeing a fascinating cast of characters and plenty of energetic debate. The three leading contenders on the Republican side – Donald Trump, Ted Cruz and Marco Rubio – are particularly interesting. They naturally have competing views on many issues, but when it comes to monetary policy, they are remarkably aligned. Unfortunately, they all line up in the wrong direction; each apparently misunderstands why central banks operate the way they do.

Begin with the front-runner, Donald Trump. He argues that the U.S. Federal Reserve should be audited. He is hopefully aware that the Fed’s books are already audited, and available for all to see on the Fed’s website. But what he really appears to mean is that all the Fed’s policy decisions should be brought before Congress and defended, and maybe even subjected to some kind of vote.

This is a very bad idea because it would politicize monetary policy. Central banks all across the world have operational independence from their government masters for good reason. Before such independence was granted, central banks were under political pressure to ease policy before elections, and this led over the years to higher inflation. Eventually, we learned that the way to keep inflation low and stable is to state this objective clearly, grant central banks the operational independence to achieve it and then hold them accountable for their performance. The past 25 years of inflation targeting in many cousntries suggests that the current system is working.

Now, consider the views of Texas Senator Ted Cruz, as reported in November by the Huffington Post: “Instead of adjusting monetary policy according to whims … the Fed should be … keeping our money tied to a stable level of gold.” Mr. Cruz is suggesting that the Federal Reserve go back a century to the days of the gold standard.

This is also a very bad idea. It would tie the Fed’s hands and prevent it from dealing with the impact of large economic shocks. During the Great Depression in the 1930s, when thousands of U.S. banks failed and the economy went into a massive tailspin, the Fed’s strict adherence to the gold standard kept it from acting. It could not extend credit to solvent but illiquid private banks without violating its gold-based rule, and so it chose instead to sit on the sidelines and watch the economic tragedy unfold.

Most economists today look back at that experience and conclude that the Fed’s policy was a major error. They also conclude that if the Fed had been using the same gold-based rules when the global financial crisis began in 2008, the subsequent recession would have been far worse than it was, when the Fed was able to act aggressively.

Florida Senator Marco Rubio also has a problem with the Federal Reserve. At a CNN town-hall event last month, he said the Fed’s job is to “provide stable currency and I believe they should operate on a rules-based system. They would have a very simple rule that determines when interest rates go up and when interest rates go down.”

While simple rules sound appealing, this is also a very bad idea. The job of the Fed is to keep inflation low while promoting growth and keeping financial markets stable. It does this by adjusting its policies, sometimes in response to shocks and sometimes in anticipation of events that are expected to occur. The shocks vary by origin, type, size, duration and impact. The almost countless possibilities mean that policy cannot follow a simple rule – and using one would prevent central bankers from doing their job, resulting in worse economic outcomes.

So far, monetary policy has not figured prominently in the U.S. presidential primaries. Based on these views, this is probably a good thing. But there is still plenty of time before the candidates will be chosen, and who knows what debates will unfold regarding the appropriate behaviour of the Federal Reserve?

The truth is that the processes of economic growth and inflation are complex, and monetary policy is equally complex. We need our central banks to maintain their operational independence and central bankers to continue using their well-informed judgment to keep our economies operating on an even keel.

Let’s hope these three bad ideas disappear soon and don’t threaten the policy coherence at the world’s most important central bank.

Christopher Ragan is an associate professor of economics at McGill University in Montreal and a research fellow at the C.D. Howe Institute in Toronto

Negative Interest Rates: What This Means

My Comments: The word “interest” defines the price someone is willing to pay to use your money. In the world of economics, if the price is zero, and knowing price is a function of supply and demand, there is either no demand or the supply far exceeds the demand. Think oil prices these days.

Interest rates last peaked in 1981. Since then they have trended down to where they are now virtually zero. Common sense suggests they have to start going up sooner or later. Or maybe not.

If you have a bunch of money, and no one will pay you anything to borrow it (ie, pay you so they can loan it out, which is what your local credit union does) you either accept that it’s going to stay under your mattress, or if you want more safety, pay someone to put it under their mattress. That is what this is about.

Feb 25, 2016 by Andrea Coombs

When a central bank embraces a policy of negative rates—that is, charging banks rather than paying them to stash their reserves at the central repository—the policy can trickle down to individual savers in the form of lower interest rates on savings, higher bank fees, higher deposit requirements and other barriers to opening an account.

Thanks to weakening economies, the European Central Bank, the Bank of Japan and Sweden’s central bank, among others, have embraced negative rate policies. Generally, the aim is to push banks to lend money and thus to stimulate economic growth by encouraging businesses to invest and consumers to spend.

Those policy moves overseas prompted some questions for U.S. Federal Reserve Chairwoman Janet Yellen at a congressional hearing earlier in February. Yellen said the Fed would need to investigate the legal issues of a pushing rates into negative territory, but that she didn’t think there would be “any restriction” on doing so. Read: Yellen isn’t sure whether it’s legal to adopt negative rates.

Keep in mind that in the U.S., this is all simply talk at the moment. And even if the Fed did adopt such a policy, there would plenty of advance warning. “We’re not in that economic environment at this point,” said Greg McBride, chief financial analyst at Bankrate.com.

Even if the economy does decline precipitously, the Fed would first have to unwind the rate hike that took effect in December, he said. “This isn’t something that’s going to be sprung on us overnight.”

Still, the talk has some people worried. Ken Tumin, the Longwood, Fla.-based founder and editor of DepositAccounts.com, says his readers have been reaching out to him, nervous about the implications of negative interest rates.

“My readers depend on income that they get from their savings,” he said. “It’s bad enough to make very little or zero on their savings, but the concept of penalizing them for having savings in the sense of a negative interest rate is very disturbing to them.”

In his review of bank offerings and publications in Sweden and elsewhere, Tumin says the main effect of negative rates has been on large institutional depositors, but individual savers also may see some effect from a negative interest rate policy.

“I’ve seen a case in Sweden where a bank is requiring more of a banking relationship to open a savings account,” Tumin says. “They want customers to bring over more money, open more accounts—a checking account [in addition to savings], direct deposit, things like that.”

Others agreed that negative rate policies can harm savers. “Instead of banks trying to entice us in with good service or little bonuses, they will be telling us to go away,” said Dean Baker, co-director of the Center for Economic Policy and Research in Washington, in an email.

“This will have the biggest impact on low and moderate income people, many of whom already don’t have saving/checking accounts due to the cost,” he said. “With negative interest rates, banks are likely to charge more money for these accounts, leading to a larger unbanked population.”

Plus, he said, a negative rate policy could lead to higher fees. “We are also likely to see fees attached to money market accounts and other types of short-term saving. People may still want them for their convenience, but we will be paying the banks to hold our money,” Baker said.

But there’s a bigger problem, McBride said. “The real concern about negative interest rates isn’t going to be the negative interest rates. It’s going to be the economic conditions that brought it about,” he said. For the Fed to institute such a policy, the economy would need to be in bad shape.

Worrying about negative interest rates is like “worrying about the landscaping when your house is blowing down,” he said. “We’d be worried about a shrinking economy, mounting job losses and businesses closing their doors.”

While there are worrisome signs in the U.S. economy, it’s not in the same deep hole as the economies of the countries that have instituted negative rate polices.

“The U.S. economy is in much better shape than our counterparts overseas who are having to employ negative interest rates,” McBride said. “Our economy is growing, unemployment is the lowest in nearly a decade.”

Even if the economy tanks, it’s unclear whether the Fed would adopt such a policy. “The Fed has other tools to try to boost the economy,” Baker wrote in a recent blog post.

“The obvious one is to explicitly target a long-term interest rate. For example, the Fed could say that it will push the 5-year Treasury note down to 1%. It would then buy enough 5-year notes to bring the rate down to this level,” he wrote, noting that longer term rates have “much more impact on the economy than short-term rates.”