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The law of unintended consequences has dealt another blow to conservative retirees who have been investing in bank certificates of deposit and short-term debt like money market funds.

Effectively, these investors have saved the banks at a huge personal cost. The Federal Reserve, which controls the money supply, has lowered the rate to almost zero that it charges banks that come to the Fed "window" to borrow. This is an effort to create as much liquidity as possible in a banking world where credit has effectively dried up and is otherwise unavailable as banks struggle to get back on their feet.

Unfortunately, those banks eligible to borrow from the Fed have taken the money, but they aren't loaning it out to people or businesses. Instead, they are loaning it to the federal government, (not to be confused with the Federal Reserve) and earning maybe 2 percent while taking that spread as profit. You can't fault them for that. After all, as one banker was quoted in a January New York Times article, "a lot of our folks have second and third homes and alimony payments and other obligations that require substantial cash." As Bill Gross, the bond-trading genius said, "It's capitalism I guess, but it's not to be applauded."

Meanwhile, there is an unprecedented $3 trillion in cash sitting on the sidelines waiting to do something —- almost anything — to try to make some money. What's a retiree to do?

A couple of ideas come to mind: One is to consider investing in blue-chip, dividend-paying stocks on a dollar-cost averaging basis. In other words, don't write one big check today to a combination of value-oriented and dividend-paying mutual funds. Instead, feed money into the market over a year's period of time to benefit from any downdrafts during that period. Think of this money as funds designed to generate income and try to ignore fluctuations in the capital value. Set up the funds to deposit any dividend income into a checking account automatically. Plan to own these investments indefinitely as a source of income and ignore the changes in capital value.

The wind behind the sustained rise in market values, after the predictable "snap-back" from the crash, is the amount of unemployed cash looking for better rates of return. Sure, there's risk in the market, but compared with no return for the foreseeable future, a little risk doesn't look so bad. When the Fed eventually raises its interest rate even slightly, the market will swoon temporarily, but that hiccup will offer an opportunity to methodically buy into a falling market which will reduce the average cost of all the shares purchased.

The next option, for someone in their 70s who started taking Social Security earlier, is to consider buying back into Social Security to generate the higher-age rate. This could increase Social Security payments by 32 percent and guarantee a larger cost of living increase in dollars. A 70-year-old male has a better than 50 percent chance of living until age 87. At least one member of a couple has a 50 percent chance of reaching age 90. The net cost, after tax refunds, of paying back four years of Social Security might be something in the order of $60,000 for most people.

To then receive an extra $7,000 per year, which can increase at normal annual inflation rates of 3 percent, looks good compared to today's $60,000 in a CD earning nothing. However, to find someone at Social Security who understands it can be a challenge. Out of 32 million recipients, only 90 people elected this option a few years ago. Trust me. It's there.

Meanwhile, let the banks bail themselves out. We'll take our money someplace else.