The bucket approach to retirement allocation
Those who lived through the 1970s and 1980s no doubt now find their photographs from those decades cringe-worthy. But while few may wish to repeat a fashion era marked by pastel-coloured suits and big hair, one aspect of those bygone decades is appealing — substantially higher interest rates than today.
The average interest rate on a six-month term deposit in Australia was 11.6 per cent in 1981. Of course, inflation was high then, too, but those higher rates allowed many retirees to generate liveable income streams without endangering their principal or taking risks in stocks.
But two decades’ worth of declining interest rates have dragged yields way down, dramatically compounding the challenge for retirees. With six-month term deposits…
