The best ways to claw back any superannuation falls

Retirees reliant on their superannuation savings have been left worse off by falling returns but experts warn them not to panic. Here’s what you should do.

Retirees reliant on their superannuation savings have been left worse off by falling returns but experts warn them not to panic.

So far this financial year members have seen their account balances slide, which has included four months of consecutive negative returns, data from research house SuperRatings found.

SuperRatings’ executive director Kirby Rappell said despite “choppy conditions in markets” investments have slowly improved in recent months.

“Since July 1 we have seen the median Australian shares and international shares option fall by 4.2 per cent and 1.2 per cent respectively,” he said.

“Typically you don’t want to be changing strategy all the time, so ensuring you get high-quality advice is paramount and that you are staying on course with your long term strategy.”

Many Australians have revelled in their investments steadily climbing over the past decade, but Mr Rappell warned this could set people up for becoming “accustomed to low levels of volatility”.

For a member with a $100,000 invested in a growth fund (77 to 90 per cent in growth assets such as equities) for the 2018/19 financial year to January 31 their return is down 0.6 per cent.

This means their balance has fallen to $99,400 — a loss of $600 this financial year.

Retirees are among those hit with falling superannuation balances in recent months.

Tribeca Financial’s chief executive officer Ryan Watson said it was critical retirees had a decent portion of money invested in cash to cope when there was a market downturn.

“Anywhere from 7 to 10 per cent in cash will avoid the need for a person to sell down in a down-turning market when they are in pension phase,” he said.

“One of the worst things people can do is sell when the investment markets have decreased.

“Whereas if people hold tight and seek quality financial advice they will be able to ride out the investment lows until the markets return to an upward trend.”

Sunsuper’s manager of advice operations Evan Poole said retirees should also analyse their fixed costs and see if they could cut back on discretionary items during a downturn.

“Fixed costs including things like electricity, food, water and things needed to survive,” he said.

“During a downturn it may be time to rethink a trip overseas and put it off for a period of time.”

The Association of Superannuation Funds of Australia’s chief executive officer, Dr Martin Fahy, urged Australians not to panic if their super balance had fallen.

“Don’t get too hung up on year on year, month on month performance,” he said.

“Talk to your super fund if you are worried, go online and get information.

“Be careful to recognise not to do something during the downturn to crystallise the downturn.”

Dr Fahy said people who sold off investments during the bottom of the global financial crisis a decade ago would be worse off than those who simply stayed put.

LOST THOUSANDS

Will and Valerie Palmer retired 18 months ago and have felt the impact of their super balance drop. Picture: Nicki Connolly

Since retiring 18 months ago Will Palmer and wife Valerie have felt the impact of drops to their superannuation balance.

Despite Mr Palmer admitted he was comfortable with the amount he had in his fund but he has noticed a fall since last year.

“I know I’ve lost thousands in my superannuation and there have definitely been a few times when it’s gone backwards,” he said.

Mr Palmer said he took a gamble on his investments, bumping up to a more aggressive portfolio, because he thought if he stuck with a conservative approach he wouldn’t be producing as much interest on his savings.

Will and Valerie Palmer with their dog 'Sox'. Picture: Nicki Connolly

The couple from Balnarring Beach on the Mornington Peninsula use a financial adviser to help manage their money.

Mr Palmer retired in 2017 to become a full-time carer for his wife who has Alzheimer’s disease and he said he tried not to think too much about his super now.

“My wife’s illness hasn’t put a dent in the savings yet,” he said.

“It may affect us later in life if we do have to go down the path of residential care.”

@sophieelsworth