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What’s the best rate for term deposits?

I am sick of the stock market and just want to go into a term deposit. What is the best rate for a year and is this long enough? Do you think I am doing the right thing? I have $400,000 in my super and I am 65 and I want it to last.

The best rate I could find for one-year term deposits with a bank was 5.41 per cent at UBank and 5.3 per cent at ING Direct at the time of writing. You can get better rates but you’re moving away from the well-known financial institutions.

So on your $400,000 you will be earning about $21,600 a year and so you should be able to get a part pension provided you can pass the asset and income tests. By doing this you will preserve your capital and get a $21,600 income from you super.

It is a safe play and it might be something you would change when the worst of the European debt disaster passes and stock markets start heading up.

The safe play means your money could be locked up when the stock market rebounds and when markets do kick it is usually with an initial big burst. People who are not worried about their capital shrinking in the short-term are confident that in the future the market bounce will make up for the bad times endured over the past few years.

Some people who still want income and are prepared to ride the ups and downs of the market have a portfolio of very good income paying stocks and collectively these can pay over six to seven per cent. This can give better income than term deposits and it leaves these investors open to enjoying the eventual market comeback. However, they’re taking risks and anything can happen with the problems Europe is facing.

Finally, I think a year is long enough as I expect the market’s potential to be better by year’s end and so that might be a good time to reassess your attitude to stocks and risks.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, January 20, 2012

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