Term Deposits
18 October 2024
It’s time to ditch Term Deposits & embrace sustainable retirement income solutions
Many Kiwis are celebrating the recent drop in the Official Cash Rate (OCR), but for retirees relying on term deposits for income, the news isn’t so good. The downward trend in rates is a stark reminder that term deposits, once a go-to for conservative savers, are now outdated and unsustainable as a long-term strategy for retirement income.
Retirement isn’t a short-term phase—it’s a 20+ year journey. And yet, the longest term deposit typically locks in your money for only five years, leaving retirees exposed to ongoing interest rate fluctuations and eroded purchasing power.
Over the last two decades, term deposit rates have been wildly inconsistent, from highs of 8% in 2008 to an all-time low of 1% in 2021. While rates briefly peaked in the 6% range in 2023, they’re now on a downward trajectory again. This volatility makes it clear that term deposits are not fit for the long-term stability retirees need.
The problem with Term Deposits in today’s economy
As costs rise and term deposit rates fall, it’s a growing challenge for retirees to generate enough income to last throughout their retirement. Even during higher interest rate periods, term deposits come with several inherent limitations:
- Short-Term Horizon: Five years might seem like a long time, but in a retirement that could span over 20 years, it’s a relatively short window. Reinvesting every few years exposes retirees to uncertain future rates.
- Limited Flexibility: With term deposits, your money is locked away for the term’s duration, and accessing it early incurs penalties. This rigidity makes it difficult to adjust to unexpected financial needs.
- Eroded Purchasing Power: After accounting for taxes and inflation, the real returns on term deposits are often too low to preserve the value of your savings. This is especially risky as living costs continue to climb.
- No Structured Drawdown: Term deposits don’t offer a controlled way to draw down savings gradually. Any withdrawals reduce the principal, diminishing future returns and leaving retirees with less income to rely on later.
Calculate what you could draw in retirement.
Lifetime Retirement Income: The modern solution to a complex problem
Retirement income planning has evolved, and today’s retirees need more than a short-term fix. They need a long-term, sustainable strategy that offers flexibility, stability, and peace of mind. This is where Lifetime Retirement Income comes in—a solution built specifically for the realities of today’s retirees.
Here’s why Lifetime is the superior option:
- Focused on Longevity, Not Short-Term Gains: Retirement isn’t just a five-year plan. It’s a 20-year or longer journey. While term deposits lock your money away for short bursts with unpredictable returns, Lifetime Retirement Income is designed for the long-term. It focuses on providing consistent, sustainable income that lasts, regardless of market fluctuations.
- Reliable Income Stream: Lifetime delivers fortnightly payments on "Super Tuesday," ensuring you have reliable, predictable income that continues throughout your retirement. Unlike term deposits, which depend on fluctuating interest rates, Lifetime’s payments are designed to remain steady and resilient to market changes.
- Flexibility & Security: Lifetime gives you the best of both worlds—flexibility to access your funds and the security of knowing your income will last. No penalties for needing your money early, and no fear of running out later.
- Built for Today’s Realities: Lifetime’s "rainy day fund" ensures that even during market downturns, your income stream remains intact. This forward-thinking approach balances growth with protection against market volatility. With Lifetime, you can rest easy knowing that your income won’t be cut just because the market takes a dip.
Choose Longevity, Choose Security, Choose Lifetime
It’s time to rethink your retirement income strategy. Term deposits may have served a purpose in the past, but in today’s complex economic environment, they fall short of providing the stability and reliability that retirees need.
With Lifetime Retirement Income, you’re securing your future with a solution built to last. Lifetime focuses on delivering consistent, reliable income that lasts as long as you do, giving you the peace of mind that comes with a sustainable, modern approach to retirement income planning.
Retirement isn’t a five-year journey—it’s a lifelong adventure. And with Lifetime Retirement Income, you’re prepared for every step of the way.
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Invest with Lifetime for a retirement income managed for living.