Chicago ? For every silver lining, there’s a dark cloud.

Just ask Thomas Pate.

Before the Federal Reserve began cutting interest rates, Pate and his wife of nearly 50 years went on more than a dozen cruises, paid for, in large part, with interest income they earned from the certificates of deposit that make up their principal retirement savings.

But that was then. These days, while millions of Americans cheer the government’s sustained bout of interest-rate cutting, the 68-year-old Pate and his wife, Tranquilla, have cut out the cruises and are focused instead on taking care of the simple necessities of life. It’s been a couple years since they sailed off for fun.

The Pates are typical of many older Americans who have seen their interest incomes diminished by the government’s effort to jump-start the economy by cutting rates a dozen times since January 2001. Rates on CDs and money-market accounts :quot; the “safe” investments in which retirees often are encouraged to put their money :quot; have dropped so low that many seniors have seen a big decrease in the income they count on to pay their living expenses.

In the realm of economic policy, notes Marquette University associate economics professor James McGibany, it’s inevitable that “some groups are going to gain at the expense of others.”

The big squeeze

Since the Fed first launched its latest round of rate cuts in early 2001, the average yield on a one-year certificate of deposit has plummeted to just 1.68 percent from well over 5 percent. During that same period the rate on a money-market account has slipped by just over half, to a skimpy 0.95 percent from just over 2 percent.

In other words, the Fed’s strong medicine for the economy is having unavoidable side effects on many seniors.

“We’ve heard a lot from our members on this issue,” says David Certner, director of federal affairs for the AARP, the large national lobbying group for older Americans. “They’re concerned about the impact of this lower rate on their income.”

Raise welcome

Some retirees have asked the national senior citizens’ group to petition Fed Chairman Alan Greenspan to raise rates.

With such a rapid reduction in interest rates, some seniors don’t completely understand why their incomes have dropped so drastically, says Tiff Worley, president of Auriton Solutions, a consumer credit counseling agency.

“From their perspective, it’s the banks that they deal with that are dropping the rates,” Worley said.

Many seniors have opted not to invest their funds in volatile stock market to avoid losing their savings. That turned out to be a good call as the market performed poorly in 2001.

But the significantly lower interest rates have forced some seniors to find other means to supplement their income.

Such are the consequences of playing it safe, experts note. In exchange for a guarantee of not losing any principle, investors must put up with lower returns, says Marc Lane, a Chicago lawyer and investment planner.

“You’re trading one risk for another,” he said.