Recession proofing your retirement

There’s much talk of recession in the media so Noel Whittaker looks at whether you need to be concerned and what action to take to protect your retirement savings.


About three years ago, in an effort to simplify some of the major issues for retirees, I wrote my 20 Commandments of Wealth for Retirees.

Because they are timeless, they are as true now as they will be in 100 years.

Number one is: Ignore the prophets of doom – they are always with us and usually wrong.

Number 20 is: Finally – keep in mind that your potential worst enemies can be the media, which focuses on the negative, and well-meaning acquaintances who may give you information that may be half right.

Right now the media is focusing on the fact that there has been negative economic news for the last quarter, and a further downturn in the next quarter will mean we are technically in a recession. The good news is that most economists believe there will be positive growth in the next quarter and that a recession will be avoided.

While the word ‘recession’ may make for scary headlines, the fact is that retirees are among the least likely to be affected. Certainly, a recession may cause greater unemployment, but the upside of that is that building prices may drop and renovations could become less expensive.

Although a recession is most unlikely to affect the amount of your Age Pension – the pension changes that took effect on the 1st of the month are a wakeup call that pensioners should be diligent to ensure that their money works as hard for them as they themselves did during their working life.

Number eight is: Don’t have all your eggs in the one basket – diversify across the major asset classes and certainly have some international exposure.

For starters, you should keep at least three years of planned expenditure in cash where it will be immune from any downturns in the market. Next, at least a third of your portfolio should be in blue-chip Australian shares because even if the market falls, which it well may, the dividends will keep on coming.

And remember, a bonus for holders of Australian shares is that most dividends are franked. This means that for most retirees the dividends are not just tax-free, they carry extra cash in the form of refund of imputation credits.

This is a time when good advice is essential. I appreciate that many retirees are nervous of shares, but the great thing about shares is that you can buy them in small parcels, and sell them in whole or part within five days.

I know there have been duds, such as ABC Learning and Dick Smith, but you can protect yourself by simply buying an index fund. This is a fund that can never go broke, and which is currently paying about 4.5 per cent mostly franked. Just keep in mind that you should have at least a five-year timeframe when investing in shares because history tells us to expect four negative years and six positive years every decade. It also tells us that the index has averaged eight per cent each year for the last 20 years.

Let me finish by reminding you that one of the most important and neglected jobs for our retirees is getting their estate planning in order. This means having a current valid will, arranging an enduring power of attorney and completing an Advance Health Directive, if appropriate.


Noel Whittaker is the author of 20 Commandments of Wealth for Retirees and numerous books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.

Related articles:
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Superannuation and the Age Pension
Seven worst retirement mistakes

Noel Whittaker
Noel Whittaker
International bestselling author, finance and investment expert, radio broadcaster, newspaper columnist and public speaker, Noel Whittaker is one of the world’s foremost authorities on personal finance. He is currently an Adjunct Professor and Executive-in-Residence with the Queensland University of Technology, as well as a committee member advising the Australian Securities and Investment Commission.
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