Investors close to retirement should not look for safety in term deposits, but in high yielding shares, investment specialist Ian Huntley says.

Investors and self-managed super fund trustees who are close to retirement are better off putting their money in high yielding shares than term deposits, according to Huntely's Your Money Weekly editor Ian Huntley.

"The whole issue around the 55 year old, 60 years old, it's very simply: you now reached an age where you don't want to see your savings go bust," Huntley said at the 2012 Morningstar SMSF Trustee Strategy Day in Sydney on Friday.

"And you also want to have a real good reliable income coming in.

"The biggest mistake to my mind that people are making, looking at the security of bank deposits. Sure, you've got capital secure, but not your income."

Huntley said that in the current economic climate, interest rates were likely to come down and this would erode the income of trustees.

Stocks with a high dividend yield on the other hand have maintained steady payout ratios and in some cases even increased their ratio.

"We have this wonderful thing called franking; it is basically tax free income," he said.

"We were banging on since June last year about how well income stocks were going and we've been banging on for a long, long time about quality stocks, where you have that preservation of capital."

Huntley pointed out that Testra, for example, offered a 10 per cent dividend yield, much higher than any term deposit.

"People are looking at the TV and say: 'These are terrible markets', and yet here is a company that wants to pay you 10 per cent tax free!" he said.

"It is amazing to see the irrationality of human behaviour in investment markets."

He also named Coca-Cola Amatil, which, although somewhat expensive at the current share price, has steadily increased its dividend.

"They increase dividends every year; it is something that bank deposits don't do," he said.