As financial markets continue to see-saw in the face of inflation and the US administration’s attempt to hold the world hostage with their tariffs, Australians nearing retirement are understandably nervous. Seeing your superannuation balance dip just as you’re preparing to retire can feel like a cruel twist of fate.
But here’s the truth: now is not the time to panic.
History shows that markets go through cycles. Yes, downturns are painful in the short term, but for many retirees, their super is designed to last decades and can continue to grow if it stays invested. The decisions you make now, especially rash ones like switching everything to cash or pulling all of your money out of super, can lock in losses and set you back far more than a temporary market dip.
We regularly speak with Australians planning for retirement who are unsure if they have enough saved. The recent volatility has only amplified that anxiety. One of the most common questions we hear is: “Is my super going to last?”
The answer depends on two key things: how much you spend in retirement, and how you manage your money over time. For peace of mind, it’s important to get across what you’re likely to need to spend in retirement. A good starting point if you’re near retirement is to figure out what you’re currently spending. Then, you can use one of the online tools available to estimate how close your super, combined with the age pension, is to covering your spending needs.
As a group, home-owning retirees report some of the highest levels of financial satisfaction in the community. Our recent research shows a single person who owns their home and lives a typical retiree lifestyle may need around $310,000 in super at retirement to deliver a yearly income of $43,000 until age 90. For a couple in the same situation, it’s around $421,000 to deliver an income of $62,000. For most retirees, the age pension will make up a significant portion of their retirement income and acts as a stable base that kicks in if their super runs low.
Of course, for those who don’t own their home or with health issues that affect their spending, the picture can be more complex. But the key is this: retirement planning should be based on your real needs and lifestyle, not fear.
Now it’s time to pause. You’ve just figured out some really important numbers in the context of the current market turmoil. For peace of mind you may consider putting savings you might have covering a few years of your expenditure needs (after you’ve taken your age pension payments into account) into a super investment option that is less susceptible to the ups and downs of the market, leaving the rest to benefit from the upside as markets recover. Because you don’t want to spend your next trip to the supermarket thinking about what the ASX is doing that day.
This market turmoil is a timely reminder of why we need better investment in independent retirement income guidance in Australia. Too many people are left guessing how much they need, how to draw down their super and how to invest in retirement. At times, advice from the super industry is poor quality and conflicted. And the complexity of the system only adds to the confusion.
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Australia needs independent, clear, accessible information and tools that help people make decisions based on evidence, not sales pitches. Asic’s Moneysmart website is making some inroads but needs to be better resourced if it is going to meet the needs of people planning their retirement.
In the meantime, the message is simple: don’t let market jitters derail your retirement plans. Staying the course, making sure your investment settings match your stage of life, and getting reliable guidance can help you ride out the storm.
Retirement should be a time of security and dignity. Let’s not let short-term market noise take that away.
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