How negative interest rates could hurt savvy retirees

Negative interest rates could be coming to Australia.

Negative interest rate worry

In September, Australia was only four rate decisions away from matching both the US and Canada’s ‘emergency’ policy decisions.

Negative interest rates could soon be possible in Australia.

Intended to stimulate the economy, negative interest rates reward you for borrowing, and penalise you for saving.

Great if you’re looking to take out a mortgage…you’ll end up paying back less than what you borrowed.

But if you’re just sitting on cash in the bank, it could eat away your savings.

Leaving your savings in the bank will now be risky. You’ll literally be paying for the privilege.

In dollar terms, if you save $10 today, a year from now you can draw out $9.

There’s no way you would let someone hold onto your cash knowing you’d get back less, later.

Of course, there are better options than just parking money in the bank.

Traditionally, the bond market has been one of them, but bonds aren’t looking much better either.

The US government’s 10-year Treasury bond interest rate just fell below their 30-day interest rate.

This ‘inverted yield curve’ has raised alarm bells.

It means investors are betting that the future is going to be worse than the present.

The inverted yield curve has been a reliable predictor of recession for the past six decades.

Bottom line: it’s time to start preparing your wealth to survive the inevitable tough times ahead.

Shielding yourself and your family from a financial crisis is never straightforward or guaranteed.

But there are certain steps you can take to put yourself in the best possible position to weather a storm.

In fact, there are some investments that could absolutely thrive.

Learn how to prepare your wealth here.





COMMENTS

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Tricky
1st Oct 2019
5:12pm
Government can certainly help by immediately reviewing Deeming Rates for Fixed Term Cash Deposits! These rates impact on over 60,000 pensioners and part pensioners.


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