The spectre of zero and negative interest rates are looming over the New Zealand financial market and those looking for a haven can't find much relief. Last week, the Reserve Bank of New Zealand (RBNZ) deputy governor Geoff Bascand suggested at least some bank depositors might want to put their money to use elsewhere.

He said negative interest rates for wholesale or interbank are possible. A negative interest rate for banks, non-bank lenders and building societies means they have to pay to keep money on deposit with the Reserve Bank, and the negative interest rate is designed to discourage them from doing so and make them lend more.

But for savers with term deposits, the Reserve Bank is ‘expecting the rates to be floored by zero’, however not until March 2021, as at the moment negative interest for retail depositors is not anticipated. The RBNZ is committed to holding the current 0.25% Official Cash Rate until March 2021.  Investors will recall that 12 years ago the Official Cash Rate was 8.25%.

To many people, interest rates at zero may seem like an unconventional policy, but on the contrary, the deposit rates have been declining for years now. The current comment by the deputy governor can be seen as a monetary policy practice that is required in response to fluctuations in the economy caused by COVID-19.

From global experience, there is no limit to how low-interest rates could go. Post the Global Financial Crisis in 2008, central banks in Denmark, Eurozone, Japan, Sweden and Switzerland implemented negative rates as part of their bond-buying plans.  All the countries except Sweden still operate in the negative rates.

Ultimately, RBNZ aims to increase economic activity by utilising capital that could otherwise be sitting idle.

While the interest rate cuts have been good news for anyone with a mortgage, they can be particularly challenging for near-retirees and retirement savers who rely on their term deposit yields for income throughout their retirement years.

People with term deposits have been feeling the squeeze for years with low-interest rates outweighing the safety and reliability of the term deposits, and now with the Reserve Bank signalling zero interest in March 2021, things are only set to get worse for the savers. For people with term deposits who find they are falling behind, there are several ways to catch up, but firstly it is good to seek out financial advice from an independent adviser.

If the goal is to maintain your desired lifestyle throughout retirement, a zero-interest rate environment adds an extra layer of difficulty to the task, mainly if other ways of generating income are off the table.

Don't get complacent

After a decade of economic growth, many have lapsed into a complacent "set and forget it" mentality. An example is the 50/50 portfolio, which divides assets between shares and bonds, which has been the classic approach to a balanced retirement portfolio.

The 50/50 rule is to balance the long-term growth of shares with the relative safety of bonds. But experts say in today's world of staggeringly low-interest rates, bonds can't offer steady interest income that can offset share market declines during bear markets.

And with central banks around the world cutting rates even further to cushion the economic impact caused by COVID-19, it's clear that the situation is not likely to change anytime soon, and therefore it is the time to rethink your retirement beyond the traditional retirement portfolio.

As the financial markets and investors' needs are evolving, experts suggest an off-the-shelf solution like a 50/50 portfolio may not be the right fit to place the entire retirement portfolio in because people are living longer and should plan for 20 to 30 years of retirement.

Others are seeking to embrace alternative assets in search of cashflow and yield.  Historical experiences in Gods Own with alternatives assets haven’t always ended well as many Gisborne farmers will attest to as wild goats roam free today from 1980’s hubris.

So, allocating a retirement capital along these lines and not revisiting the retirement strategy may have some downsides like rising inflation and increasing expenses in retirement.

A personalised approach

The success as an investor starts with the key questions like: Why are you investing? What are your priorities? Where is your destination? When do you hope to get there?

Each person is unique, with different tastes, preferences and risk appetites. Relying on generic investment principles can put investors at a disadvantage as they don't account for specific needs, goals and life stages.

That is why it is important to have a personalised investment strategy that is closely monitored by a financial adviser as market forces change. A good adviser comes alongside you, guides you with integrity, and every investment decision will be made within the bigger context of your life goals.

Ultimately, paying attention to the retirement planning process makes your destination more achievable and remember that while on the road to retirement, it's never a good idea to fall asleep at the wheel.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or download it here.