00:00:00:09 - 00:00:04:05 A lot of SASS members think once they’re retired, the hard work is done,
00:00:04:05 - 00:00:09:13 when in fact retirement is when you really should keep a close watch on your money.
00:00:09:13 - 00:00:13:01 It's wise to think very carefully about market ups and downs
00:00:13:01 - 00:00:14:21 that could affect your retirement.
00:00:14:21 - 00:00:20:02 The last thing you need before retirement is a negative return or lack of planning.
00:00:20:02 - 00:00:21:22 So how can you protect yourself?
00:00:21:22 - 00:00:23:22 It's all about balance.
00:00:23:22 - 00:00:28:04 How might we balance our investment returns with the risks?
00:00:28:04 - 00:00:30:01 Here are four things to think about.
00:00:34:01 - 00:00:37:08 The first thing to consider is sequencing risk.
00:00:37:08 - 00:00:40:20 This is the risk that the order and timing of investment returns
00:00:40:20 - 00:00:46:03 can negatively impact the overall value of your savings, especially in retirement
00:00:46:03 - 00:00:49:23 when you are withdrawing your money in super to fund your lifestyle.
00:00:50:11 - 00:00:52:02 Sequencing risk is heightened
00:00:52:02 - 00:00:53:16 in the early years of retirement
00:00:53:16 - 00:00:55:09 when negative returns early on
00:00:55:09 - 00:00:57:19 can deplete savings faster,
00:00:57:19 - 00:01:00:15 leaving less invested to recover and grow
00:01:00:15 - 00:01:02:06 when the markets improve.
00:01:02:06 - 00:01:04:15 In retirement, most SASS members
00:01:04:15 - 00:01:09:18 may be exposed to sequencing risk in a real way for the very first time.
00:01:09:18 - 00:01:13:17 Some strategies to minimise the negative impact of sequencing risk are:
00:01:13:17 - 00:01:17:07 Investing in a diverse range of asset classes can help
00:01:17:07 - 00:01:21:01 reduce the impact of poor returns in any single category.
00:01:21:01 - 00:01:25:07 Having a flexible plan to adjust the amount and timing of withdrawals
00:01:25:07 - 00:01:29:16 from your super, based on market conditions, can help preserve your savings
00:01:29:16 - 00:01:32:24 by not selling down assets when prices are depressed.
00:01:32:24 - 00:01:37:02 Keeping a portion of your savings in low risk liquid assets
00:01:37:02 - 00:01:40:13 can also provide a buffer for short term spending needs.
00:01:40:13 - 00:01:45:09 Managing sequencing risk is an important part of a financial plan for retirement,
00:01:45:09 - 00:01:48:11 and an area that expert advice will help you feel confident
00:01:48:11 - 00:01:51:07 your super can last well into your retirement.
00:01:51:07 - 00:01:54:24 The second thing to consider is longevity risk.
00:01:54:24 - 00:01:58:17 Put simply, longevity risk is the risk of outliving your money,
00:01:58:17 - 00:02:01:19 leading to financial insecurity in later years
00:02:01:19 - 00:02:06:04 and dependence on the age pension as an only source of income.
00:02:06:04 - 00:02:08:08 The key to managing longevity risk
00:02:08:08 - 00:02:11:22 is taking the right balance between risk and return.
00:02:11:22 - 00:02:14:21 Some strategies to reduce the risk include:
00:02:14:21 - 00:02:18:07 diversifying your super in a mix of lower risk investments
00:02:18:07 - 00:02:21:23 that provide certainty of income, with a mix of higher risk investments
00:02:21:23 - 00:02:25:24 that provide growth potential to support longer retirements.
00:02:25:24 - 00:02:29:10 Carefully planning how much you withdraw from your super
00:02:29:10 - 00:02:32:19 based on modeling and forecasting of different scenarios
00:02:32:19 - 00:02:35:16 could change the nature of your investment strategy.
00:02:35:16 - 00:02:40:01 Identifying both your short and long term needs is an important step
00:02:40:01 - 00:02:43:10 in understanding what strategy is right for you.
00:02:43:10 - 00:02:46:17 Life doesn't always follow your financial plan,
00:02:46:17 - 00:02:50:05 so it's important to regularly review it with your financial planner.
00:02:50:05 - 00:02:53:21 The third thing to consider is your appetite for risk.
00:02:53:21 - 00:02:56:24 Your appetite for risk is a level of risk you're prepared to take
00:02:56:24 - 00:02:59:06 to achieve higher returns.
00:02:59:06 - 00:03:02:22 One way I help SASS members identify their appetite for risk
00:03:02:22 - 00:03:07:16 is by comparing where they're invested today, to where they could be invested.
00:03:07:16 - 00:03:08:16 This exercise is a
00:03:08:16 - 00:03:11:11 great way to determine the right level of risk for them.
00:03:11:11 - 00:03:15:08 Market volatility and risk are never far away,
00:03:15:08 - 00:03:19:11 so it's crucial to stay disciplined and stick to your long term plan.
00:03:19:11 - 00:03:23:07 Getting financial advice that's tailored to your circumstances
00:03:23:07 - 00:03:28:05 is the best way to ensure you make decisions that are right for you.
00:03:28:05 - 00:03:30:07 To find out more or to make an appointment
00:03:30:07 - 00:03:32:09 to talk to an Aware Super Financial Planner,
00:03:32:09 - 00:03:36:21 visit us online at aware.com.au/statesuper
00:03:36:21 - 00:03:40:23 or call us on 1800 841 633.