Do you want your retirement savings working harder for you?
If you’re retired or heading into retirement, chances are you want reliable, consistent income. Something that keeps pace with the rising cost of living. After all…when you’re living on a fixed income you want:
- Predictable cash flow
- Security of capital
The issue?
Term deposits and government pensions just aren’t cutting it anymore. These days as a couple you need roughly $76,505 per year to live comfortably (and that’s rising every year).
If you keep failing to outrun inflation with ‘safe’ savings accounts…your savings will eventually run out.
An increasing number of retirees are looking to alternative fixed income options like first mortgage investments backed by real property. Why? This type of alternative lending solution offers higher returns, security backed by tangible assets AND more predictable income than your average savings account.
Interested to learn more? Let’s dig in…
Table of Contents
Why Retirement Savings Accounts Aren’t Cutting It Anymore
Term deposits have long been the standard bearer for retirees looking for a safe place to stash their nest egg. Deposit your money with a bank or building society, earn a fixed interest rate. Sounds simple right? Unfortunately, times have changed.
Even with the RBA’s latest rate hikes in 2026, the top 12-month term deposit rates are hovering between 5% – 5.45%. OK, don’t worry that sounds great…until you take taxes and inflation into account. Suddenly that juicy interest rate doesn’t look so juicy.
That’s not the worst of it either…
Recently released data by CFS revealed that almost 1 in 4 retirees are using their pension to service debt. Living costs are stretching retirees thin and savings just aren’t going as far as they used to.
Yes, the pension helps. But if your super balance is sitting at the national average of $420,000 you’re going to run out of money.
Simply put…
Relying on traditional savings accounts just won’t provide enough income for most retirees these days.
How Property Backed Income Works
Property-backed income solutions fall under the alternative fixed income umbrella. As the name implies, borrowers take out a loan which is secured against real property.
Instead of giving your money to a bank that pays you interest (term deposit), your money is given as a loan to a borrower that needs to pay you interest. The interest they pay you is your income.
Loan products that allow investors to receive income backed by property are typically referred to as first mortgage investments. The term ‘first’ is important here. This means that the investor has first dibs on being paid should the borrower default on the loan.
First mortgage backed by real estate > Shareholders > General debtors…
Why does this matter?
Investors know that if things go south, their capital is protected by real estate. If the borrower defaults on their loan, the lender/securities holder is the first to get paid.
Straightforward right? Investors provide capital. The capital is loaned to a borrower who is required to pay it back with interest. That interest is then paid to the investors monthly. Oh…and all of it is secured by real property.
Comparing Alternative Fixed Income To Term Deposits
Alright – let’s cut to the chase. If you’re a retiree wondering how this type of alternative fixed income stacks up… here’s the rundown.
| Term Deposits | Alternative Fixed Income |
|---|---|
| Offer lower returns (interest rates). For example, a term deposit may offer 5% interest p.a. Alternative fixed income products typically offer higher returns. | Generates higher returns than a standard term deposit. |
| Government guaranteed (up to $250,000). | Secured by tangible assets. (Real property) |
| Capital is locked away and cannot be accessed without paying a penalty. | Some investments can offer more flexible terms. |
| Interest paid at maturity of deposit. | Monthly interest paid to investors. |
Takeaways? Alternative fixed income like first mortgage investments can offer higher returns secured by real assets. And the best part? Many options pay a monthly income. Perfect for retirees who need to supplement their pensions.
Benefits Of Mortgage Backed Income For Retirees
This specific alternative fixed income vehicle comes with plenty of perks. Let’s check them out.
Higher Interest Rates
Pretty obvious this one. If you can earn a better return on your investment than the bank… why wouldn’t you?
Alternative fixed income won’t always beat the banks… but when it does, that extra money can go towards your retirement lifestyle. Every little helps.
Real Estate Security
Shares plummet in value overnight. Managed funds disappear leaving investors empty handed.
When it comes to security… if it’s backed by real estate it’s real. That’s not always the case with every investment. But the point stands. It’s hard to lose something that’s tangible. And real estate is very tangible.
Australia’s also been blessed with a stellar property market. Typical of Western countries but nevertheless… having your investment backed by a tangible asset is great peace of mind.
Monthly Income
Who doesn’t love receiving money each month? If you’re retired chances are multiple income streams are needed to live comfortably.
Monthly interest payments made straight into your bank account. That’s a solid benefit for any retiree.
Portfolio Diversification
Remember the whole ‘not putting all your eggs in one basket’ thing? That’s called diversification.
There’s a reason it’s one of the oldest investment strategies out there. By diversifying investments the risk is spread across multiple asset classes.
For retirees, it’s wise to have some money in term deposits (low risk), some money coming out of superannuation (tax effective) and some money allocated to alternative fixed income. That’s a winning combination for most retirement portfolios.
What To Consider Before Investing
As with any investment… there are always risks. That being said… here are a few things to consider before jumping in:
- Liquidity: Your investment may not be as liquid as your savings account. Be sure to have emergency funds available.
- Do your research: All mortgage investors aren’t created equal. Transparency is important. Make sure you understand how the loans are being assessed. Things to look for include LVR’s, borrower quality, historic default rates and the fund managers track record.
- Check they’re licensed: Ensure the investment provider is under an Australian financial services licence and is fully regulated.
- Talk to a professional: Before making any investment changes speak to a qualified financial adviser. They will be able to advise you on what’s best for your specific situation.
Closing Thoughts
Alternative fixed income investments are hot for a reason. Interest rates offered on traditional term deposits and savings accounts are no longer providing retirees with enough income.
First mortgage investments backed by real property offer:
- Significantly higher interest rates than your typical term deposit
- Security of capital backed by real estate
- Income paid monthly to investors
Australia’s retirement landscape is changing. Cost of living increases are continuing to rise, while the average super balance at retirement is nowhere near enough to live comfortably.
If you’re retiring or considering retirement in the next few years, now’s the time to start educating yourself on alternative income solutions. The retirees that take action to diversify their income streams will be the retirees enjoying their retirement.