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

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

How your deferred SASS account is invested

As a SASS member with a deferred benefit, your account is now pooled and invested in a diversified mix of assets.

Depending on the choices you’ve made, most of your benefit is either invested in your selected strategy, or, if you haven’t made a choice, in the Growth option until age 60. It will then transition to the Balanced option after that. Your SANCs component, which includes your Basic Benefit, is invested separately by the trustee, following a strategy that’s closely aligned with the Growth option.

So yes, your balance will move with the market, and while that can be unsettling at times, short-term ups and downs are a normal part of long-term investing.

That’s when switching to cash often comes up. In volatile markets, it’s common for members to wonder if they should shift everything to cash - especially when retirement is on the horizon.  

It might seem like the safer option but making that move at the wrong time can do more harm than good.

Approaching the retirement risk zone

An important risk to consider is how much volatility or variation in investment returns you can tolerate for your super savings; this is particularly important in the early years before and in 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 years before retirement 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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That’s why, how, and when you invest - plus how much you keep exposed to growth assets - really matters at this stage.

It’s also when many people start thinking about switching to cash. It’s understandable but making that move at the wrong time could set you back. To learn more watch our investments in retirement video: how your super grows video.

Cashing in or missing out?

If you switch to cash when markets are down, you’re locking in losses. And if markets recover, as they most often do, you miss out on the upside. We saw this clearly during the COVID-19 downturn. Members who stayed invested generally saw their balances bounce back. Those who moved to cash often missed the rebound.

There’s also inflation to consider. While cash might seem low risk, over time it can lose value. That same amount might buy a lot today, but it may not stretch as far down the track if it’s not invested and growing.

Plus, you might be retired for 30 years or more. That’s a long time for your money to work. A solid retirement plan isn’t about reacting to headlines; it’s about staying focused on your goals, being flexible when needed, and making informed decisions when the time is right. 

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.

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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.

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Next steps for deferred members

If you’re a SASS deferred member, knowing your options can help you make sure you have the funds to suit your retirement lifestyle.

Next steps

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.