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Ask an Expert: With all this market volatility, should I switch my personal account to cash?

If you’ve been feeling a bit uneasy about your super and wondering if it’s the right time to change your investment strategy, you’re not alone. When markets get bumpy, it’s totally normal to start considering whether your savings are safe and what to do next. Do you switch some of your account to the cash strategy, or if you are able to cash it out of super altogether? 

Our financial planners get asked this all the time, especially by SASS members who are getting close to retirement. And it makes a lot of sense: you’ve built up your benefit over your working life, and it’s natural to want to protect it. But before you make any decisions, let’s look at what’s really going on and how your SASS benefit works.

Most of your benefit isn’t affected by the market

Here’s some good news: for most contributing members, up to two-thirds of your final SASS benefit is worked out using a formula. That part doesn’t go up or down with the share market. So even if there’s a downturn in financial markets, a big chunk of your money isn’t impacted.

That said, your personal account (your contributions plus investment earnings, minus fees) is invested. If you haven’t made an investment choice, it will default to the Growth option. But even then, it’s only a portion of your total SASS benefit. 

Learn more about investment strategies in SASS.

Leaving SASS at retirement and making decisions

When you exit SASS at retirement, that’s when the big decisions start because you will no longer have the protection of the defined benefit, and you’ll need to plan and manage the risks of investing your super savings. 

An important risk to consider is how much volatility or variation in investment returns you can tolerate for your super. This is particularly important in the early years of retirement when you are more exposed to sequencing risk also known as sequence-of-returns risk. In simple terms, sequencing risk is about how the order of your investment returns can affect your retirement savings, especially when you start taking money out.  

Losses during this period can have a bigger impact because you’re needing to draw on those savings as a pension at times when their values may be at depressed levels leaving a smaller base, giving your investments less chance to recover and fund the remainder of your retirement years.

Imagine two retirees with the same amount of savings and the same average annual return over 20 years. If one retiree experiences negative returns in the first few years and the other experiences positive returns, the first retiree may run out of money sooner, even though their average returns are the same.

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Managing this risk involves careful planning and diversification to safeguard your savings from market volatility. To learn more watch our investments in retirement video: how your super grows video.

Cashing in or missing out?

To perfectly offset or mitigate sequencing risk, some members may be tempted to take a very conservative approach and invest mainly in cash and low risk investments. This approach can come with its own risk that the value of your money will decrease over time due to rising prices. This means that the same amount of money will buy fewer goods and services in the future than it does today. 

Inflation risk is especially important for retirement savings. If your savings do not grow at a rate that keeps up with inflation, you may find that you have less money to spend in retirement than you expected. This is why it’s important to invest in assets that can potentially outpace inflation. 

Stay the course for a healthy retirement

Whatever stage of life that you are, it’s important to have a plan for your savings and that plan should be followed and reflect your needs and only adjusted when your individual circumstances change, not in response to a change in market volatility which tends to be the wrong time to change your plan.   

If you are nearing retirement it is a good idea to get professional help with your financial plan from Aware Super who are experts in your scheme and investing for retirement.

Attend a webinar 

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Book an advice appointment

We’re experienced in your State Super scheme and know the ins-and-outs of planning for a successful retirement.

Book a no-cost, obligation-free appointment with an Aware Super financial planner.

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Where to next?

What does a comfortable retirement really look like?

Retirement planning isn’t just about money — it’s about time too

What happens to my SASS benefit if I don’t choose when I retire? 

Market review and outlook

Back to Edition 20 >

Issued by Aware Financial Services Australia Limited (ABN 86 003 742 756, AFSL 238430); wholly owned by' Aware Super (ABN 53 226 460 365).

Past performance is not indicative of future performance.

General advice only. Consider if this is right for you having regard to your objectives, financial situation, or needs, which have not been accounted for in this information. Read the PDS and TMD before deciding to acquire, or continue to hold, any financial product. You should read the Financial Services Guide, before deciding about our financial planning services.