While this rate cut is great news for home owners and those trying to enter the property market, the question remains as to what the impact is for self-funded retirees?

When equity markets were volatile and returns uncertain during the global financial crisis (GFC), many investors, including self-funded retirees, were quite happy sitting on hordes of cash earning six per cent or more on term deposits.

If you are reliant on this income to meet your financial goals take note – the majority of term deposits now offering no more than three per cent per annum. Further, if you add in the impact of inflation, which was around 1.7 per cent for the year ending December 2014, the financial impact of a low interest rate environment for many cash investors is concerning.

It can be argued that now is quite possibly the worst time in history to be investing in cash. With the RBA suggesting that there may be further rate cuts on the horizon, this situation could get even worse for retirees.

So what is the alternative?

The current environment is encouraging investors to take a little more risk and look at alternatives to cash, including shares and property. For example, the recent sharemarket gains are attracting more investors to equities.

The below table provides a summary of the current gross dividend yields paid by the largest ten companies on the Australian Stock Exchange (ASX) by market capitalisation.

While we are not telling everyone to rush out and switch all your cash holdings to the above Australian company shares, when considering the current return from term deposits, it may be time to look closely at the overall balance of your portfolio and consider some alternatives.

Sure, your capital may be subject to a higher level of market volatility. However, it is worth noting that dividend rates only changed marginally over the course of the GFC and many companies are now in far better shape, and paying higher dividends than ever before.

Please seek the counsel of a certified financial planner before making any decisions regarding your portfolio. 

The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information.