The interest rates on term deposits leaves a lot to be desired. It's almost impossible to live off a 3% or lower interest rate.
I think the best thing to do would be to invest in good dividend shares.
Australian Foundation Investment Co. Ltd. (ASX: AFI) (AFIC)
AFIC is one of the oldest companies in Australia having operated for almost a century.
It invests in all the solid blue chips on the ASX like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Telstra Corporation Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES).
AFIC has slowly and steadily grown its dividend over the past decade and it could remain a solid performer in the years ahead. AFIC currently has a grossed-up dividend yield of 5.8%.
Whitefield Limited (ASX: WHF)
Whitefield is another listed investment company (LIC) that has been around for many decades.
It has a similar list of holdings to AFIC but has actually outperformed AFIC by a noticeable difference over the last five years. However, past performance is not an indicator of future performance of course.
Whitefield currently has a grossed-up dividend yield of 5.35%.
Arena REIT No 1 (ASX: ARF)
Arena is one of the largest REITs in Australia. It leases most of its property portfolio to childcare operators such as Goodstart and G8 Education Limited (ASX: GEM). It also leases a few healthcare buildings to Primary Health Care Limited (ASX: PRY).
I have been impressed with how strongly Arena has grown its distribution over the past few years and it's expected to keep going.
Arena is currently trading with a distribution yield of 5.55%.
WAM Leaders is one of the LICs run by the high-performing team at Wilson Asset Management.
It focuses on the shares in the ASX200, which may offer less growth potential but does offer bigger dividends and perhaps safer returns.
WAM Leaders is currently trading with a grossed-up dividend yield of 3.83%, but it may soon have a yield similar to the other WAM LICs.
Foolish takeaway
All four options should provide strong income over the coming years. At the current prices I would pick either Arena or WAM Leaders because I think they will generate bigger returns than Australia's big blue chips.
