Can you do anything to safeguard your retirement savings from coronavirus fallout?

Is it too late to save your super?

concept image of rescuing money from downturn

This is a trying time for everyone. And while your health should be your biggest worry, the outcome for your retirement will, for many, still be a concern.

Should you be shifting your super into cash, or is it too late to take action? Should you be shifting some or all of it into cash holdings? What should you be doing with your retirement savings?

YourLifeChoices asked SuperRatings executive director Kirby Rappell for his predictions for how coronavirus will affect retirement incomes, as well as any tips he may have for our members.

Q. This is a challenging time for superannuation and investors. Should our members be taking any action to safeguard their retirement savings?
We have been looking at this, and have tried to add some context.

It has been a challenging couple of weeks for superannuation fund members. The reality is that the pullback in markets has been sharp and has impacted member balances, on paper at least.

Overall, there remains a need to keep the current market conditions in context. For most members, while there may be a fall on paper, the only time the loss is crystallised is if you sell out. If you're in your 20-40s, your super will stay invested for another 30 to 50 years, so it's all about a long-term plan and having the confidence to stick with it.

Q. Is it too late to switch to cash holdings?
Older members are more likely to be in more conservative options, which have been less impacted. But be careful if you consider switching to cash, as you will be locking in the fall in performance. We suggest members talk to their fund or an adviser who they trust to help ensure any decision is aligned with a long-term strategy.

Q. What asset mix should retirees be considering right now?
In general, to reach retirement goals, you need some exposure to shares and shouldn’t get caught up in short-term noise. Even members in their 50s are likely to need to rely on their super to draw down for the next 20-30 years. Often, members will have a cash bucket setup that provides for two to three years of cash payments. This is sometimes a default offered by funds. This allows greater certainty for short-term income needs, while leaving medium/long term exposure to the market. However, for those members who have ridden the market down to date, historical experience suggests that switching to cash has not worked out well.

Q. What are your predictions for retirement savings? Should older people be worried right now?
Over the past 10 years, we have seen events including SARS, MERS, swine flu and Ebola. Markets have worked well and delivered good returns to members.

It is likely that the average balanced-style option is down around 9.5 per cent this year. However, this number is rapidly evolving and needs to be viewed in context.

Last word?
Markets and super fund members struggle to deal with uncertainty. At the moment, this is the only thing that is certain. Long-term strategy remains key to realising the long-term outcomes super fund members will rely on for their retirement.

Are you worried about your retirement savings? Have you checked your balance? What will you do to see your savings through this crisis?

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COMMENTS

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adbob
17th Mar 2020
11:36am
Don't forget these things:

1: Share market prices only reflect those shares that were traded - if most people simply want to hold then their own valuation of what they are holding is not reflected - same goes for the housing market.

2: For most investors the purpose of owning shares is to enjoy dividends over a long period into the future. Certainly there are speculators and for everyone there is the possibility of a fire-sale type need to sell up (eg on death) but for most people it's dividends that matter - not capital value. Even if 2% of the population were to die life would go on afterwards - companies would make profits - and interest rates getting back to anywhere near traditional levels is likely to be either along way off - or never - in fact govt stimulus action may hold interest rates down and hence increase the value of shares. In the meantime some will suffer - others will prosper during the season of panic. Eventually things will settle down and even if we live with death on our doorstep (as we once did) life will go on - just like it did in London during the blitz.
Anonymous
17th Mar 2020
3:59pm
These sort of articles indicate to me that the horse has already bolted and things are about to get better not worse.
flowerpot
17th Mar 2020
11:56am
I made the mistake of converting my super investments to cash in 2008 during the GFC. I was sure I was going to lose everything and panicked. Consequently, I missed the upswing and lost even more money which took even more years of hard work to replace. I'm leaving my diversified portfolio alone this time. I don't have to touch it until next year when I'm 66 but I'll leave it invested during my retirement too. Swings and roundabouts.
Anonymous
17th Mar 2020
12:15pm
Be aware you may have to pay a lot more in capital gain tax as well. If you bought CBA for $5.40 then you would still have a big CGT bill even at today's prices.

I sell down when market goes up and buy back in when market goes down. I have certain bargain prices in mind that I just buy in downturns.

17th Mar 2020
12:12pm
You only know the value of your house when you seel so you should only focus on the value of your shares when you sell them.
flowerpot
17th Mar 2020
12:18pm
Retiring Well - all my money is in my super fund so I leave all the buying and selling with them. What I now know not to do is switch investment options.
Anonymous
17th Mar 2020
12:24pm
I buy and sell myself in my super fund as I don't trust the so called experts at all.

17th Mar 2020
12:22pm
I must be missing something but the numbers are no where near other past outbreaks. eg H1N1 was many times worse than Covid-19.
Sundays
17th Mar 2020
12:35pm
Covid 19 is only just starting in Australia. Look to Italy to see how quickly it has spread.
KSS
17th Mar 2020
1:39pm
Retiring Well, you are quite right not to be following the scaremongering going on.

The main cause of concern among science and health professionas (i.e. those who know what they are doing not those following social and hysterical media) is that because this is a newly identified virus, they don't know nor can they predict with certainty the trajectory or ramifications of the infection. Looking at the story so far, only those who are obviously sick are being tested. Of those tested and therefore positively diagnosed with COVID-19, there are clear indications that there are serious outcomes (even death) for certain groups of people i.e. older aged, underlying health conditions particularly cardiovascular conditions, diabetes, kidney disease etc. Also whilst the flu has a transmission rate over 1.4, COVID is about double that which means one person can infect 21/2 people so potentially it can spead faster.

Taiwan took a different public health approach and tested everyone, going to people's homes even and isolating people earlier. It looks like they are now coming out the other side with far fewer cases.

Because the virus is new, there is no specific treatment and no vaccination. However, there are two existing drugs that look promising for use with COVID and I believe 12 people are currently being used as the first human guinea pigs, and UQ have already developed what looks like a potential vaccine that a manufacturer is trying to make. But these will not be available for some months to come yet.

Notwithstanding the fact that many people reject the flu vaccine every year, that flu (and other infectious diseases like say hepatitis B) kills far more peopple (and in the same age groups as COVID-19) every year, it is this fear of the unknown that is causing the panic, aided and abetted by the sensational reporting and warlike venacular used by mainstream and social media.

For the vast majority likely to be infected, it will be a very mild illness with few if any symptoms. Incidentally this was the reasoning behind the UK first approach was was towards herd immunity - they have now changed that approach.

I have said it may times here, people just need to calm down.
Anonymous
17th Mar 2020
2:44pm
I agree people just need to calm down. But I doubt it after the scenes I'm seeing from this mornings attempt to have the senior's hour.

Yes I saw an interview with the first person to get the Covid-19 vaccine. he was a little braver than me.

My daughter is coming to see me this arvo as she is desperate for toilet paper.
So I've cut up some newspaper squares and tried them with a bit of string like we used to do in the old days.

Regularly when I went shopping last year they had toilet paper less than half price so I'd put a pack or two in my trolley. Little did I know that it was a very good idea not just saving a few pennies.
Mez
22nd Mar 2020
3:12pm
The ageing process is integrally connected to your level of immunity which naturally decreases with age which is why there are more health issues hence deaths but everybody is different and we have the young whose level of immunity is comprised either genetically or by lifestyle such as smoking and drinking or /drug taking and excessive continuous stress.
KSS
17th Mar 2020
12:27pm
The worst possible thing to do would be to sell up now (or transfer from shares to cash in a superfund) and solidify the paper losses. But like all previous slumps, it is a lesson to have a cash reserve of 6-12 months to tide you over until the market recovers as it inevitably will.
JB
17th Mar 2020
2:36pm
I have wondered is it better to have it parked in cash even for a few months then convert back to conservative. I know cash definitely not long term but very short term . Must admit it’s bit of a roller coaster at the moment .
flowerpot
17th Mar 2020
12:32pm
Retiring well -those are the numbers from people infected that have actually been tested. There are far more who will have the virus and don't know it yet and it's highly infectious. Look at Italy: 79 to over 2000 in a week. Also, the Chinese government cannot be trusted with transparency. They'll say anything to cover up their own mistakes. I bet there are still numerous outbreaks over there.
Anonymous
17th Mar 2020
2:47pm
Those satellite photos of those mass graves in Iran tell a different story tot he actual numbers as well.
hyperbole
17th Mar 2020
3:09pm
they dont have the great health system we have or good government either
Viking
17th Mar 2020
8:41pm
hyperbole, Italy has one of the best health systems in the world and I don't think we could claim our government is much better than theirs. Over recent years we have probably matched them on prime minister turnover. As for our current incumbent, I hesitate to call him our leader, a trained monkey would make no worse decisions. Missing in action on the fires, $millions wasted on a Christmas Island photo opportunity; Sports Rorts 1 & 2 sounds very Latino to me, he declared he was going to the FI race the night before it was cancelled and delayed the 'no more than 500' rule so he could go to the footy despite the risks to the population and floundering before and since. Not exactly the record of the selfless leader or government Australia deserves.
Mez
22nd Mar 2020
3:19pm
It is essential to have leave when in executive roles which are stressful!
That is the whole purpose of holiday leaves and which Scomo was entitled to and of course, managers are always in touch by phone or internet in case you were unaware!
fairplay
17th Mar 2020
3:31pm
JB .....I was a bit like you (and still am a bit confused/worried) , however have decided to leave as is in conservative.Main reason is the unit price of the shares and i now understand how it works ( self educated with some guidance from the fund)...it seems what happens when you cash out you are virtually selling while the market is falling and then buying into cash at a higher rate than the cash rate was 2-3 weeks ago.Your current no. of shares in the conservative option remains the same, the unit price is moving downwards and that is why your balance is going down.When you switch back from cash it is most likely the cost of the shares in the conservative option would have gone up (buying high) + if you are reducing your balance because you are drawing down an allocated pension you will most likely find that you can not nearly buy the number of shares you once had in the conservative option so it may well take much longer to get back to some sort of reasonable result. Of course there is the sleep test, but for me i will endure some sleepless nights and hopefully will reap the rewards down the track .....just hope the track is small .....Cheers and Good Luck
OJ21
17th Mar 2020
4:17pm
I want to know if i should put a hold on my income stream so may units aren't sold at low prices. I'm not sure if I can do this though. Need to talk to super fund.
Anonymous
17th Mar 2020
5:23pm
Some super funds you have to take a minimum income stream or the fund is not compliant and you will be taxed.
cupoftea
17th Mar 2020
6:47pm
I lost $21000.00 it is never to late to change
Viking
17th Mar 2020
8:12pm
While I totally agree with the advice on this occasion you need to develop your own financial literacy and market understanding using 'expert' advice as just one input to making your decisions. Just look at AMP as an example of a bunch of financial experts, I recall when their shares were around $22.00 shortly after their float, now they're worth less than a midi of beer. Some time before last Christmas when a YLC financial expert claimed 'you'd be mad to hold wealth in cash' I had the proceeds of a surplus house to invest. FInancial advice weighed on my mind but I could foresee storm clouds ahead so I put the money into a term deposit. At least now I can sleep at night. So instead of buying your regular magazine or reading the sports pages, just occasionally buy a money magazine or a financial paper and at least learn the basics of how money works. You don't need a fortune to start. When colleagues at work were pooling their money to buy lotto tickets I decided instead to save my money to buy shares. It may have been antisocial but the lotto returned nothing while my lotto money provides a useful retirement contribution. There is a saying I learned while sailing, "follow the fleet and you'll never win, sail your own boat." Of course you have to bother to learn how to but the saying applies equally to your life's earnings and savings.
adbob
21st Mar 2020
11:13am
Try reading up on Australian bank bail-in laws.

In Cyprus banks were recently bailed out by their own depositors.

It happened in Australia during the 1892 recession.

Australia's self-image as an inherently prosperous country is built mainly on the post-war economic boom. they don't come often but there have been plenty of tough times in the past.

There was nothing jolly about a "jolly swagman". Swagmen were men who roamed the
countryside hoping to find some farm work in exchange for a meal - their only hope of
survival. This in a nation which could easily have afforded a comprehensive welfare system
but chose not to because the owners of wealth were too tight.
Viking
21st Mar 2020
3:08pm
adbob, I'm no capitalist in fact there are more than a few on YLC who have accused me of of being a socialist. I believe in a good social security safety net and I'd be happy to see my taxes spent on better supporting the really needy instead of some of the waste that occurs now.
I am not particularly religious but the biblical story of seven years of plenty followed by famine influences my way of life. I wasn't brought up in Australia nor in an environment of affluence but one of the several impressions from my early days here that sticks in my mind today is one of incredible waste. It became clear to me that if you work hard, work smart, keep your nose clean, don't waste but save and invest you would never be dependent on the State. In my opinion we focus too much on non-productive sport instead of education and productivity. We have the highest per capita wastage on gambling and historically one of the highest consumptions of alcohol, we have an incredible number of cars, nearly all imported per household. Take a fraction of all of this, add it to government waste and inefficiency and it would pay for the best welfare system in the world. The irony is we would hardly need it because we would be so productive and innovative processing and adding value to the numerous fantastic raw materials we produce that everyone would have a well paid job and a good pension.
Viking
21st Mar 2020
4:45pm
PS if I'm wrong then why do we have a minister for gaming or gambling in every State but not a minister for industry or technology? Without looking it up I am sure you could name at least the last (if not present) Federal sports minister, partly because together with the PM she was involved in rorts- but not the last or present Federal industry minister. But if I recall until recently it was all about jobs and growth, but no industry minister able to lead it. If we did we may not be so vulnerable at present because we'd be able to make masks, protective gear and hospital equipment ourselves instead of relying on the source of the problem.
skinner
17th Mar 2020
9:02pm
Why would anyone consider reverting any shares back to cash? Now is the time to buy when the prices are low. I just wish I had more cash available for further buying. Because both wife Jo, & I are retired, we need to keep enough cash to keep us going. Now is NOT the time to panic & liquidate any shares. Keep them & await the upturn & collect the dividends.
skinner
17th Mar 2020
9:02pm
Why would anyone consider reverting any shares back to cash? Now is the time to buy when the prices are low. I just wish I had more cash available for further buying. Because both wife Jo, & I are retired, we need to keep enough cash to keep us going. Now is NOT the time to panic & liquidate any shares. Keep them & await the upturn & collect the dividends.
Ed
18th Mar 2020
8:59am
The government should consider halved the allocated pension withdraw to help the pensioners to save their capitals.
mick
21st Mar 2020
9:06am
Regretfully Viking, you are on the money with your comments. A very disappointing and worrying performance from our PM. Spent too long in marketing roles.
Mondo
21st Mar 2020
4:23pm
mick, sadly he isn't even a marketing man, true marketing is about researching and fulfilling customers needs; he isn't even an ad man, he has no training in and failed at that. He's a stunt man and stunts usually involve a fair degree of deception. All we get and will ever get from Scamo is a series of short term stunts because he doesn't have a strategic brain in his head. Leadership is about gaining peoples' confidence to follow. If the strong arm tactic of quarantine on Christmas Island and then Darwin wasn't a stunt how is it that we have had infected people flying in from Asia and Iran without quarantine and now we have the reality of 3,000 passengers from an infected cruise ship landing in our largest city and be able to scatter throughout the land. The last person anyone should willingly follow is a selfish stuntman.


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