Gone are the glorious higher-yielding days of 2011.

According to the latest report from GoBankingRates.com, savings and CD rates may have seemed skimpy two years ago, but current rates are much lower.

“The 1% savings account rate is now the unicorn of banking — a mythical number depositors are sure doesn’t exist — and even traditionally higher-yield certificate of deposit accounts aren’t faring much better,” according to the website.

For example, in February 2011, six-month, one-year, and two-year CDs had average annual percentage yields of  0.60%, 0.85%, and 1.20%, respectively. Last month, GoBankingRates found the average APYs had fallen to 0.30%, 0.45%, and 0.67%. For savings accounts, the average APY last month was an almost-invisible 0.21%: $2.10 a year in interest for every $1,000 on deposit.

Looking ahead, Go BankingRates found few indications that things would get much better very soon, for depositors. “As the economy shows few signs of recovery and will likely remain fairly stagnant over the next few years (the Fed has announced the target rate will remain between 0 and 0.25% through 2015), banks must become increasingly conservative in the interest rates they offer until there is a definite sign that rates will begin to pick up again,” the report concluded.

For advisors, the current situation and future outlook presents an opportunity to encourage clients to move money from bank accounts; once clients have enough cash in the bank to meet emergencies, they may be better off putting excess funds elsewhere.

Dividend-paying stocks are an obvious alternative, especially those companies with a history of increasing payouts regularly. The new tax law ensures that dividends will continue to enjoy favorable tax treatment: even the highest-income clients will pay no more than 23.8% in tax to the IRS, including a premium 20% rate on qualified dividends and the 3.8% Medicare surtax. In addition, several types of fixed income funds have a history of low volatility along with yields far higher than bank payouts.

On the planning side, advisors may consider suggesting that clients in their 60s defer Social Security benefits. If those sexagenarians need cash, they can draw down their zero-point-something percent bank accounts. Meanwhile, any delay in starting Social Security from age 62 to age 70 provides an increased benefit amounting to around 8% a year, indexed to inflation, lifelong, backed by the federal government.


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