Protecting your cash in retirement

THE burning question many retirees have is how to protect their capital. Where do you park your money that is truly safe?

Protecting your cash in retirement

THE burning question many retirees have is how to protect their capital. Where do you park your money that is truly safe?

The options vary: Bank accounts - either term deposits or variable-rate online savings accounts, cash management accounts, fixed-interest securities or under the mattress.

If you have retired, have paid off your house and the kids are finally off your hands, preserving capital is a major consideration.

Scott Francis, financial planner and owner of A Clear Direction, said retirees should aim to have five years' worth of cash in a term deposit.

"But there is a risk in putting all your money in a term deposit as it gets eroded by inflation, and that is a risk that doesn't get talked about enough. But you can sleep at night knowing you've got enough cash for the next five years,'' Mr Francis said.

"With the rest of your money, you should put it into growth assets that are volatile but we know have a higher than expected return. Australian shares are still paying good income, with franking credits,'' he said.

"In the short term, shares are a terrible investment because they are too volatile and in the long term cash is a terrible investment because you have to pay for inflation and income tax. So long term, you need a mix of both.''

Author and financial adviser Noel Whittaker said online savings accounts and fixed-term deposits were ideal places to park money.