Making the most of market volatility: insights for retirees and pre-retirees

If you’re in or approaching retirement, market developments may have made you more engaged with your super or pension than ever before – leading you to question: Is there any damage to my savings? Is now a good time to retire? Will I have to temporarily leave retirement to seek part-time work?   

With retirement either in your sights or part of your reality, the last thing you should need to worry about is how market volatility might impact your savings. But staying up to date and informed about your options may help. Below, we offer some helpful considerations to keep in mind at this time.  

It’s important to remember that markets regularly experience volatility for various reasons. The Coronavirus pandemic is also a factor, but one that will likely pass in time. While difficult to forecast, history shows us that markets do recover form disruptive influences – for example, from the Global Financial Crisis. In the decade following the crisis, global share markets recovered and delivered returns of roughly 10% to investors. In 2019 alone, Australian and global shares delivered exceptionally strong returns of 24% and 27% respectively. This also means that even in retirement, your super balance could continue to experience fluctuations.  

But if you were planning to retire soon, it’s possible that you may need to consider temporarily delaying your plans depending on your financial circumstances. The impacts and longevity of the Coronavirus are difficult to forecast. However, the average recovery period following events in history indicates that investment markets could experience volatility and lower returns for an extended period of time. If working is no longer possible, you may be eligible for the Age Pension, which could help supplement part of your lifestyle.  

If you are able to delay retirement and continue working, you could consider some of the investment opportunities that may arise from volatility. For example, buying into share markets when they’re down (and cheaper) could mean the value of those investments rises when markets recover over time – potentially adding more value to your retirement savings. But this doesn't mean you should buy anything and everything that’s on sale. For example, a company’s share price may be falling because of other factors (for example, a management change or a legal case) that could erode its long-term potential. It’s important to consider these factors and to be confident that a company’s value will rise in the future.  

At the same time, it can still be sensible to continue budgeting and saving for a rainy day – particularly in the current environment, where regular day-to-day life may be disrupted. Maintaining a separate savings fund could offer some peace of mind in uncertain times – especially for members whose daily lives may be impacted by economic developments as a result of businesses and services temporarily closing down to accommodate social distancing measures, for example.  

No matter the state of markets, it can also be helpful to remain engaged with your super – even in simple ways, such as regularly reading fund updates, staying up to date with market developments, or reviewing your super fund and financial plan as your personal circumstances change with age.