Where can I get the best fixed deposit with monthly interest payouts?

Dear reader,

You ask about savings or investments that will yield an income. If you want a decent return, I suggest products with an investment term of five years or more.

The two options I recommend in this case are retail bonds and participation bonds because you can get interest as high as 11.5% per annum.

You can manage the former on your own, but you may need a financial planner’s help with participation bonds.

There is one cautionary note, however: If you withdraw all the interest at 11.5% per annum without retaining some of it to add to the capital, you will regain the capital value in five years – but the purchasing power of that investment will now be eroded by inflation.

Therefore, as each year goes by, you’ll be able to buy less with the interest.

On the other hand, if you want that capital to grow, I suggest that you only withdraw 5% of the 11.5% interest and reinvest the rest. This is especially important if that money is going to be used to fulfil your long-term income needs.

A third option

You don’t mention your age, but retirement planning is about getting your savings and investments to produce income – and the same principles of ensuring that the capital grows (so that its income can keep up with inflation) apply.

Many retirement income investments, such as living annuities, build that ‘interest-yielding’ component into them to hedge against stock volatility and to ensure a steady stream of income flowing into the investment – and out to you (once you are over the age of 55).

They too are likely to use bonds (government, corporate and other) which, while treated as ‘interest’ by Sars, are quite different. They can potentially lose capital if interest rates drop and the bond is surrendered early.

Read:
The final countdown: Why the last ten years before retirement are crucial
Retirement savings options: An educational guide

In summary, before embarking on any investment, be very clear on the timing, accessibility, and preservation needs of the capital.