Hi Tammy, I’m really worried about inflation, what is happening overseas and the potential impact on my Super balance. I have just retired – I cannot afford to lose any money! I’m thinking about moving it all to cash. Is that sensible? Thanks. Joan, Dee Why

Hi Joan, your concerns are very understandable and valid. Retirement is a huge adjustment. It can be a time of heightened stress and anxiety. When I talk to clients about retirement planning, we don’t just discuss saving enough money to retire or what they can afford to spend. We also talk through the more intangible ‘sleep at night’ factors as well.

When you move from receiving regular cash flow from employment, to being reliant on your accumulated wealth to fund your lifestyle, movements in the value of that wealth can be extremely worrying. Managing this worry is a key aspect of retirement planning.

Time is a significant factor when managing investment risk. The longer you hold an investment, the more likely you will achieve the expected return. A woman retiring at age 65 has an average life-expectancy of around 23 years. As you age, your life expectancy also gets longer. The average 65-year-old man is expected to live to age 85, but at 85 is expected to live to age 91. These are also national averages. Living on the beautiful Northern Beaches gives you a longevity boost. When you are considering how to invest your super at retirement, it is important to remember your investment timeframe may be more than 20 years.

In the short-term, the value of an investment may fluctuate wildly, and can potentially go down in value. Selling investments at a loss in early retirement can significantly impact how long your nest egg will last. When faced with these risks, it is human nature to seek the safety of cash to limit potential losses. Unfortunately, when it comes to investing, doing what feels right is often the worst decision.

The longevity of your nest egg is also impacted by the average investment return achieved over the long term. Cash is less volatile, but returns are lower and may not keep pace with inflation, devaluing these funds over time. Capital growth investments, such as shares and property, can be very volatile in the short term, but over the long term return expectations are higher.

As with everything in life, the key is to not put all your nest egg into one basket. It is important to strike a balance between short-term stability and comfort and long-term returns. A well- structured portfolio can provide both.

Quick Tips: If your Super is held in a single investment option, such as a ‘balanced’ option, your short-term and long-term investments are all held in one basket. If the long-term investments have fallen in value, you do not have the flexibility to selectively draw on the short-term investments to give the long-term investments time to recover in value. As a result, the return a retiree receives on their Super account may be very different to the return quoted for the underlying investment option.

Following our human instincts can be the quickest way to lose money. A financial adviser can help stop you make the wrong decisions. Call me on 8376 0350 if you have any further questions.

Regards, Tammy.

Tammy Marshman and Up Wealth Sydney Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd, AFSL number 230323, an Australian Financial Services Licensee.

This is general information only, as in preparing it we did not take into account your personal objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate for your personal circumstances. Although the information is considered reliable, we do not guarantee that it is accurate or complete and you should not rely upon it. Please seek financial advice specific to your situation before making any financial, investment or insurance decision.