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Protecting your investments from market volatility is even more important just before and during retirement. While many investors can wait for their investments to bounce back, as a pre-retiree or retiree you may not have time on your side.

Key points:

  • Investing in retirement is a balancing act. On the one hand, you want to take on risk to grow your savings and on the other you want to safeguard the savings you’ve built.
  • When you retire, you no longer have regular contributions going into your account. You’re also withdrawing an income from your super. So any market drop could permanently affect your super balance.
  • When you open a retirement income account you get to choose where the super savings are invested. It’s important to choose what the right investment option, or mix of options, is for you.

Why timing matters when investing for retirement

When you are approaching retirement, big dips in the market can have an outsized impact on your investments. This is because of a concept known as sequencing risk. Understanding how to manage sequencing risk can help you feel more confident about your future savings and income when markets are volatile.

Watch this video to find out more.

Feel confident even during times of market volatility

At Aware Super, we change the way we invest our members super as they move into retirement. Market falls just before retirement can have a more significant impact than at any other time of life. In retirement, avoiding losses is more important than making gains. Protecting your investment is important.

You have less time to make up any losses, and less money available to top up your super to ‘make up your losses’. This is because you are drawing down on your savings.

Our investment approach aims to get the best possible outcome for each phase of your life. The chart below shows how our approach can help you get the best possible outcome.

MySuper vs Peer Fund Median

Based on a typical Aware Super female member with $105k (median) at age 50 working until and retiring at age 67. It is assumed that that the member’s employer contributions during accumulation are made based on the legislated Superannuation Guarantee rates (growing from 10.5% at age 50 and incrementally to 12% at age 53 and stay there). The salary of the member over time is assumed to be the same as the average Aware Super female member’s salary for different ages. In retirement, the annual consumption is assumed to be $41,000 and is financed by both the Age Pension and drawdown from Super. Admin fees are $52 + 0.15% for accumulation and $52 + 0.23% for pension. Results are shown in real terms discounted by historical AWOTE for accumulation phase and historical CPI for retirement phase. Investment returns are for the period from January 1996 to December 2022. Aware Super returns are based on historical returns. Peer fund median data is sourced from SuperRatings (2005 to 2022). For accumulation, peer fund is the median returns from the SR50 Balanced (60-76) Index. For periods before 2005 when peer fund median returns are not available, Aware Super Growth option returns are used to replace the median return from the SR50 Balanced (60-76) Index. For pension, peer fund is the median returns from the Conservative Balanced (41-59) group.

Aware Super investment options

Aware Super offers a range of investment options in retirement to suit your needs. You can choose from our diversified options, single asset class options, or tailor your own mix1. It’s up to you.

If you don’t make a choice, we’ll invest your super in our Balanced Growth Option. This is where about 50% of our retired members invest their super in retirement.

The Balanced Growth option has been designed by our experts with the needs of retirees in mind. It’s designed to achieve strong and consistent returns, but also safeguard the savings you’ve worked so hard to build.

1 Some asset classes are not available as single asset class options. For example, infrastructure and private equity. This means it could be harder to achieve the same degree of diversification if you choose your own mix.

Specially designed investment approach

Our approach aims to give our members the confidence to enjoy their retirement.

There are 3 ways we invest to help our members’ savings last in retirement, even through market ups and downs:

1. Investing in a diversified portfolio of quality assets

This means investing in a number of different asset types, like shares, cash, unlisted property and private equity.

Diversification helps to spread investment risk. You benefit from this because not all investments are likely to rise and more importantly, fall at the same time.

2. We invest in unlisted assets to further increase diversification

Being a large super fund, we have the opportunity to invest in assets that individuals typically aren’t able to invest in, such as unlisted assets, like infrastructure and property. These investments often generate stable income streams over the long-term.

This helps to smooth returns over time, even during periods of market volatility.

3. We invest to minimise the impact of market falls on your savings

We understand the importance of safeguarding the retirement savings of our members nearing and in retirement.

In retirement, we deliberately invest differently for our members in the balanced and more conservative options, to help cushion the impact of large market falls. This can help retirement savings go the distance so your income can last over the long-term.

Where to next?

Need advice?

At Aware, our financial planners are experienced in your State Super scheme and know the ins and outs of planning for a successful retirement.

To help you make better decisions for your retirement, book a no cost, obligation free appointment.

Learn more about retirement

We’re here to help you create your next chapter with confidence and guide you throughout your retirement.

Attend a free SASS webinar

Get your questions answered by an expert. Our webinars provide you with an opportunity to learn more about your scheme - and your decisions at exit.

This communication contains general advice only, which means we have not taken into consideration your objectives, financial situation or needs (circumstances). Before taking any action, you should have regard to your own circumstances, and seek appropriate professional advice if you think you need it. Further, this communication does not contain, and should not be read as containing, any recommendations to you in relation to Aware Super's products. You should also read our product disclosure statement (PDS) and Target Market Determination before making a decision to acquire a product. Contact us to make an appointment to see one of our financial advisers and read their Financial Services Guide carefully if you are seeking financial advice.

Financial planning services are provided by Aware Financial Services Australia Limited, ABN 86 003 742 756, AFSL No. 238430. Estate planning services are provided by Aware Super Legal Pty Ltd (ACN 606 835 170), an Incorporated Legal Practice.