Description
Interest rate cuts are greeted with delight by homebuyers and other borrowers, but what if you are a retiree and depend on interest payments for your income? In this article, we discuss the possibility of negative interest rates, the alternatives available to retirees, and finish with a call to speak with your financial adviser.
Introduction
While cuts in interest rates are greeted with glee by homebuyers and other borrowers, for the millions of retirees and others who depend on interest payments for their income, falling interest rates can be a disaster. For them, a drop in interest rates from 4% to 3% equates to a 25% drop in income. If rates fall from 2% to 1%, income falls by a massive 50%. Add in even a modest level of inflation, and many retirees are going backwards financially. And while the RBA has indicated it doesn’t want to go down the strange path of negative interest rates, this has happened in several European countries and Japan. Imagine: depositors pay banks a fee to store their money, and borrowers receive interest payments rather than make them.
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