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How market volatility affects your super—and what to focus on as retirement approaches

Mature male on his laptop

Global share markets have swung both ways this financial year – geopolitical uncertainty has resulted in some falls, but markets have also hit record highs. Markets are always moving up and down, but periods of increased volatility can make anyone feel uneasy, and when you’re closer to retirement, it’s natural to feel that more acutely.

When markets get bumpy, it’s totally normal to start considering whether your savings are safe and what to do next. But before you start losing sleep or making sudden moves, it’s worth stepping back and understanding what market volatility actually means for your SASS benefit, what to focus on as you approach retirement, why investing in retirement is different, and how you can safeguard your savings. 

Why being in a defined benefit scheme matters right now

One of the biggest advantages of being in SASS is that the bulk of your retirement benefit is calculated using a formula. Your employer benefit is based on your salary, points accrued and years of service – not driven by investment markets.

For contributing members, this means the defined benefit component of your account is sheltered from market ups and downs. The investment risk sits primarily with your employer, not with you. However, your personal account (your contributions plus investment earnings, minus fees) - is invested in the market. 

In short, being in a defined benefit scheme like SASS provides a level of protection that most people in accumulation-style super funds simply don’t have. It’s one of the real advantages of the scheme.

Key things to focus on as retirement approaches

For contributing members of SASS, the decisions you make around your work arrangements can have a significant impact on your benefit at retirement. That’s why it’s important to understand the formula for your defined benefit, and how you can manage your work arrangements now to maximise your retirement benefit later.

That means having a good handle on:

  • how your Final Average Salary (FAS) is calculated.
  • what is included and excluded in the calculation of your superable salary.
  • whether you have maximised your accrued benefit points.
  • how your work patterns and decisions may affect your final benefit.

Your employer-financed benefit is calculated using your salary in the years leading up to retirement. 

When you exit SASS, your Final Average Salary (FAS) is calculated using: 

  • the average of your superable salary on the day you retire, and 
  • your superable salary on 31 December of the previous two years. 

These three amounts, added together, divided by three, become your FAS.  

So, your FAS is important as it will directly determine what your employer will contribute to your benefit. Your superable salary includes your base salary, some allowances, and for some members a shift loading for shift workers. In practice, it means that accelerating or maintaining higher earnings during this period can help significantly boost your final SASS benefit.

Taking the superable salary reported by your employer and how your employment conditions may impact on your final average salary into consideration in those years before retirement is key to maximising your SASS benefit. 

Find out more about your superable salary and SASS.

Your SASS benefit is built upon;

  • your contribution rate, and 
  • your years of service. 

If you haven't already accrued the maximum number of benefit points (6 points per year up to 180 points), contributing between 6% - 9% to your personal account will help boost your accrued points toward your employer-financed benefit and your final benefit.

As you get closer to retirement, it’s important to consider how changes to your working arrangements impact your superable salary, FAS and final retirement benefit.
 

Your choices and how they could impact your superable salary

  • Working part-time: Your equivalent full-time salary is always used to calculate FAS, regardless of whether you are working full-time or part-time. However, working part-time will affect your ability to earn benefit points according to your salary ratio. 
  • Shift loading: If you are a shift worker then you may have a shift loading included in your superable salary. In the lead up to retirement continuing the required number of shifts will maintain the loading (as it isn’t pro-rata for periods of leave or part time work).
  • Purchasing leave: Under this arrangement with your employer, your superable salary will be reduced by an amount equal to the number of the leave days you purchase. Your superable salary, and hence FAS, will reduce if purchased leave is taken in the time frame your FAS is calculated. 
  • Acting in higher duties: If you receive a higher duties allowance for a continuous period of more than 12 months, the allowance should be included in the salary reported by your employer. 
  • Significant salary reduction: As you approach retirement you may choose to move to a lower paid position as an alternative to retiring from the workforce. If your salary drops just before you cease employment, your benefit from SASS will also drop. You may be able to protect your super entitlements if you’re over age 55 and move to lower-paid employment late in your career. This is called ‘crystallising’ your benefit. To be eligible you must have a single reduction of your full-time equivalent salary of at least 20%. The crystallised benefit will continue to be adjusted by investment earnings until you cease employment (through resignation, retrenchment, invalidity, retirement or death) and it is paid out. Your employer will still be required to make super contributions on your behalf, but they cannot pay them into your crystallised SASS account.

    You can elect to join another complying super fund of your choice or you can join SASS as a new member, as long as you do so at the time your original benefit is crystallised. If you become a new SASS member, your new membership benefits will accrue in the scheme based on your lower salary, including the Basic Benefit. For more information refer to STC-Fact-Sheet-14-Crystallising-Your-Benefit-After-Age-55.pdf.

Ceasing as a contributing member

While your defined benefit is protected now, the picture changes when you cease contributing to SASS either through deferring your benefit or rolling over to another super fund. When that happens all of your super becomes exposed to investment markets which means how your money is invested really starts to matter. 

The importance of staying diversified and invested

Once your super is invested, a few key considerations come into play. For example, questions like how long your money needs to last and how much you will be relying on your super to fund your lifestyle will help shape how you choose to invest your savings. And understanding how markets behave is part of that picture too. 

Markets are always moving up and down, and even though it can feel uncomfortable in the moment, periods of volatility are normal and expected in investing. The key is making sure your savings are invested in a way that matches your situation.

Investing in a diversified portfolio, which means spreading your investments across different asset classes, industries and regions, can help manage risk and smooth returns over time. That’s because all investments don’t perform in the same way at the same time, so if one area underperforms, others may hold steady or even rise, helping to cushion the overall impact on your savings. How close you are to retirement will also shape which investment option is right for you.

When markets fall, so can your balance, and it can be tempting to move into cash to avoid further losses. The challenge is that switching to cash after markets have already fallen can lock in losses – and it can mean missing out when markets recover. Cash can feel safer, but returns are much lower, and the real risk becomes your money not keeping pace with the rising cost of living. Over 20 to 30 years, inflation of 2-3% per year can reduce purchasing power by 50% or more.

It’s also important to consider your time horizon. Even after you retire, your investment horizon is likely to still be long – often decades - which is why it’s important to stay invested in an option that suits your goals and timeframe. Often the best action when markets are volatile is no action at all. 

Why timing is everything when investing for retirement

As you move into retirement, another important risk to understand is sequencing risk. This is the risk that negative investment returns happen at the wrong time. This matters most in the early years of retirement, when your balance is at its highest and you are taking money out of your super to fund your lifestyle.

A market downturn early in retirement can have a much bigger impact than one earlier in your working life or later in retirement. This period is often referred to as the “retirement risk zone.”

Navigating market volatility in retirement

Our Head of Investment Strategy, Michael Windchester explains how market movements affect your super, why diversification matters and how to stay focused on the long term.

Retirement is one of life's biggest transitions — and for SASS members, it's a particularly important one. For much of your working life, your defined benefit has done a lot of the heavy lifting — largely shielding your super from the ups and downs of investment markets. But when you retire, that changes. Your savings will be exposed to market movements and from that point on, how your money is invested really starts to matter.

It's completely normal to feel unsure about that shift. And that's exactly what I want to help you with today. I want to walk you through how investment markets can impact on your super in retirement, why having a well-diversified portfolio is so important at this stage of life and how to stay focused on your long-term goals — even when markets feel a bit uncertain.

You've probably heard the term market volatility — markets going up and down. Although it can feel uncomfortable in the moment, periods of market volatility are a normal and fairly frequent part of investing. In retirement, things work a little differently to accumulation and it's all about your time horizon.

Once you start drawing on your savings to fund your lifestyle, a significant market fall early on is much harder to recover from — you may not have the time to wait for markets to bounce back. And that means the timing of market movements can have a bigger impact on your retirement savings.

I'd like to talk through sequencing risk. Now, don't worry about the term — it's actually a fairly simple idea. It's not just about what returns you get, it's about when you get them.

For example, imagine two people retire with the same amount of money and over time, they earn the same average return. But one experiences a market downturn early in retirement — right when they've started drawing an income. The other experiences that same downturn later. Even though the average returns are the same, the outcomes can be very different.

Because taking money out when markets are down can leave less invested to recover and grow over time. And that's why this period — just before and just after retirement, what we call the retirement risk zone — is so important. Getting your investment strategy right at this stage — how you invest and what you stay exposed to — really does matter.

The key thing to remember is this: Retirement isn't the end of investing — it's just a new phase, where your money needs to work a little differently. And with the right approach, you can continue to generate income, manage market ups and downs and feel confident your savings are working for you over the long term. 

If you'd like help understanding your options or building a plan that's right for you, we're here to support you. We've been helping SASS members navigate market volatility and understand the ins and outs of planning for retirement for over 20 years. We're experts in your scheme and investing in retirement.

You can make an appointment with an Aware Super financial planner by visiting us at aware.com.au/statesuper or call us on 1800 841 633.

How advice can make a big difference to your retirement

Protecting your investments from sequencing risk and the decisions you make leading up to retirement can make a big difference to your life in retirement. By understanding this impact alongside your retirement goals, you’ll be in a better position to make decisions that are right for you. 

If you’re approaching retirement, think about what happens when you leave SASS and your entire benefit becomes exposed to the market and whether you need a plan for that transition. If you’d like to talk it through, an Aware Super financial planner can help you understand how your benefit works in the current environment and what to consider as retirement gets closer. 

Your first appointment is free of cost or obligation. Book at aware.com.au/statesuperadvice or call 1800 841 633.

Where to next?

How to retirement-proof your relationships > 

Tax time tips for SASS contributing members >  

Ask an expert >

Market review and outlook >

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General advice only. Consider your objectives, financial situation or needs, which have not been accounted for in this information and read the relevant PDS and TMD before deciding to acquire, or continue to hold, any financial product. Advice provided by Aware Financial Services Australia Limited (ABN 86 003 742 756, AFSL 238430), wholly owned by Aware Super. You should read the Financial Services Guide, before deciding about our financial planning services. Issued by Aware Super Pty Ltd (ABN 11 118 202 672, AFSL 293340), trustee of Aware Super (ABN 53 226 460 365).