Retirees hit by rate cuts: FPA

FPA/bonds/property/term-deposits/

8 February 2001
| By Lachlan Gilbert |

While the announcement of rate cuts yesterday by the Reserve Bank of Australia was good news for home-owners, the Financial Planning Association (FPA) believes it is bad news for self-funded retirees on a fixed income.

FPA spokesman Kevin Bailey has issued a warning to retirees who rely on fixed incomes such as term deposits to examine other investment options.

"Retirees need to diversify their income sources into such avenues as dividends, property, fixed mortgages, bonds and term deposits," Bailey says.

"This diversification will provide stability over time. Diversification is crucial particularly when there is potential for slowing of the economy."

But not all retirees will experience such problems. Bailey says that a significant number should stand to benefit from the rate cuts because of the relative attractiveness of other forms of investment in the reduced rate environment.

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