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Self funded retirees suffering in low interest rate climate

Official interest rates fell once again this week, which is great news for those with home loans, but if you are a self funded retiree you are most likely suffering in the current low interest rate environment.

As we all know self funded retirees get little support from the government, yet these are the people who worked hard and made wise investment decisions that enabled them to enjoy their retirement. In my opinion the government should be encouraging more people to become self funded in retirement given that the cost of prevention has to be far less that the cost of supporting a community of pensioners.

With current interest rates at around 3 to 4 percent, income levels for self funded retirees have almost halved over the past two years, which must be creating hardship for some. It is for this reason why the argument for keeping money in cash is diminishing given that retirees would potentially receive more income by investing in shares and receiving a higher yielding tax paid dividend.

So what can we expect in the market?

The question on a lot of people’s mind is have we seen the bottom yet? It is possible but as of today this is still unconfirmed. Over the past week the All Ordinaries fell away to close lower for the first time in 5 weeks, which could be the start of the down move to test the low of 10 March that I have been expecting.

As I mentioned last week, I believe the move down will last for around one or two weeks before the market rises again to around 4200 points with my preferred target at around 4500 points in May or June. My expectation is that we will see the high occur sometime in May which will be followed by the market falling away once again, before it rises to its yearly high around September. Despite my outlook over the next few months being positive, we still need to be prepared in case the market does fall away as this is still a real possibility.

Right now the best and safest opportunities in the market are in the top 50 shares, however, I would caution people to take extra care with the banking stocks, as I still believe their strong run up over the past few weeks is not sustainable and that there is a higher probability they will fall away in the next month.

Dale Gillham
Chief Analyst
Wealth Within

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Dale Gillham

Dale Gillham

Dale Gillham is a sought after key note speaker and author of the best selling book 'How to Beat the Managed Funds by 20%'. He is renowned for his upfront and straightforward share market commentary, sought after by many major newspapers and magazines around Australia, as well as national television including National Nine News and Sky News. In this blog he talks about all things relating to shares and investment, with particular focus on how to invest your money wisely.

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