Retirement incomes post COVID-19

Kaye Fallick: Jeremy is the go-to guy for retirement income information, and we’ve asked him to join us today to discuss what retirement will look like in a post COVID-19 world.

John Deeks: Jeremy Duffield welcome to the show.

Jeremy Duffield: Thanks, John. Thanks, Kaye. Good to be here. Obviously a tough time for retirees and in some ways with a lot of uncertainty due to COVID-19.

John: So what are the clues sir? As far as moving forward post COVID-19?

Jeremy: Well, look, I think the government’s been very helpful in terms of helping out with the Age Pension on a number of fronts. So I think that’s reassuring for retirees. And of course, the Age Pension for most Australians is the foundation of their retirement. So the government’s additional contributions – the reduced deeming rates – are really helpful to retirees. And so investors then have to think about the other parts of their retirement program, which includes super, cash, and any non-super investments they might have. And I think each one of those requires a little different thinking. So with respect to the market overall, I’d encourage retirees not to panic. And to have confidence in the long-term growth prospects of Australia, and of course, that underlies the future of returns on superannuation and on their private share market investments.

Kaye: So, Jeremy, just to pick up on something, you said, I believe the deeming rates changed on the 1st of May, is that correct?

Jeremy: That’s right. They’re changing, they’re dropping down by about three quarters of a percent.

Kaye: Yeah. Which is a big deal because it –

John: That was something you lobbied for from your side too, Kaye.

Kaye: We certainly put it in as a recommendation so that as you say actually will assist people. So are you happy if we point the discussion, first of all, because of deeming rates, to cash? You have shared with me that a lot of retirees carry a lot of their savings in cash.

Jeremy: That’s right. About 30 per cent of our age pension customers. I think with today’s low interest rates, that’s quite a worrying statistic. I’d like to see our retirees having diversified portfolios where they have half cash to meet their emergency needs, but they [should] also have part portfolio and shares and some money in fixed income investments as well.

Kaye: So are you prepared to stick your neck out and tell us some kind of percentage mix there?

Jeremy: Well, I really think it varies depending on the person. It’s fine to be conservative. But everyone is really different. For example, my mother, who’s 91, now has 100 per cent of her money in equities and has for 30 years. So she’s been a total share market investor. But most people aren’t uncomfortable with that level of share market risk. So then they might have a balanced portfolio and they might have a traditional definition of a balanced portfolio, 50-50, where you might have 50 per cent in shares and 50 per cent in cash and fixed income investments.

John: Jeremy, every day you open the paper and they’re almost prepping us now for some pretty bleak times ahead with the amount of money that’s been poured into the community and to businesses to keep everybody afloat. But there is a lot of pessimism coming from the treasurer both locally and nationally. How is this going to affect us? Cause we all seem to be getting a bit concerned now.

Jeremy: Well, it is a very concerning event, we obviously haven’t had anything quite like COVID-19 before with such a sudden impact on the economy, really through government measures to decide to shut down the economy and particularly to shut off foreign visitors, which of course is such an important part of the Australian economy. And so we really don’t know what’s going to transpire and how we’re going to come out of this. The signs are very encouraging in that Australia is getting control of the infection rates. That’s very, very positive and so hopefully not too far distant. The government will start to relax some of the economic restrictions that will get things moving again. And so as in most share market debacles of the past, we hope to have a recovery that improves both the economy and the share market prospect over time.

Kaye: So Jeremy, I guess the really big question here, and I understand everybody’s situation is individual. But the big question for me is, if I listen to you and I think I have too much in cash, and it would be smart to have some in the market. The market seems to still be sinking, so how would I have the courage to say, I must put some money in there, even though emotionally I’m thinking it’s going to be lowered tomorrow?

Jeremy: Well, I think you got to realize that no one rings a bell when the market’s at its bottom. And I think you have to realise that with the market down something like 29 per cent from its highs, that there is relative value in the market with a long-term perspective. So I sort of take the view of, shut my eyes and leap in. And if I was afraid to leap in all at once I’d start to toe my way in, by taking a step at a time, doing what they call dollar cost averaging, putting some money in each month, but trying to put my fear aside and try to move forward. You won’t pick the bottom. But if you think there’s reasonable value in the market and you have a reasonably long-term perspective, then I’d start buying some diversified share portfolios now.

Kaye Fallick: And would you be buying domestically and internationally?

Jeremy: Yes. I think it’s always good to have a mix. Certainly, international has done very well on the back of a weak Australian dollar and strong US markets. The US market worries me a little bit because of its valuation levels, but I’d do a mix of Australian and international shares, with a bias towards Australian shares because of the franking credits.

John: Jeremy, thank you so much for giving up your time for the podcast today. We do appreciate it. Jeremy’s the chairman of Retirement Essentials. It’s an online firm helping people apply for the Age Pension, and you can go to, or of course, as always, go to YourLifeChoices where you’ll see the link. And Jeremy, we do appreciate your sage advice. Once again.

Jeremy: My pleasure, John, Kaye. Thank you very much.

Written by YourLifeChoices Writers

YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.

Leave a Reply

GIPHY App Key not set. Please check settings

Mind Your Own Retirement Episode 45

How much should Peg keep in cash?