Soon-to-be retirees are being warned by the Reserve Bank governor that they face tough times ahead and will need to take risks with their lifesavings to fund their retirement.
Central banks around the world have lowered their interest rates to record lows to stimulate their economies, causing yields on safe investments such as term deposits to fall.
The RBA’s Glenn Stevens says that as a result, retirees will have to take more risks with their investments than those in the past in order to generate an adequate future income.
“Those seeking to make that purchase now – that is, those on the brink of leaving the workforce – are in a much worse position than those who made it a decade ago,” he told a banking summit on Tuesday.
“They have to accept a lot more risk to generate the expected flow of future income they want.”
National Seniors chief executive Michael O’Neill said historically low interest rates had halved the income of some retirees in the past couple of years.
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