Barry told us that he was ‘freaking out’ with the tariff changes and subsequent market fall. Sharon’s clients, Ben and Mary had similar views. They told her that they had watched their super savings ‘collapse’ over the past 10 days and were thinking of moving more money from super to their bank accounts.
We asked Sharon whether she was able to help Ben and Mary and, if so, what information and support they needed before deciding if it really would be smart to take a lump sum out of super and put it into a term deposit, which they viewed as a safer option.
Here are the particulars of their situation (we have not used their real names):
Ben is aged 68 and currently receiving an Age Pension. Mary is 60 and her super remains in accumulation. Their assets are:
Term Deposit (due September) $60,000
Ben’s super $300,000 (ABP)
Mary’s super $250,000 (accumulation account)
Joint personal assets $20,000
They are worried most about what they perceive to be an alarming drop in their super and feel if this continues, they won’t have the necessary savings to enjoy a full and productive retirement. They are both concerned they will ‘end up on a full Age Pension with very little money to top it up’.
Sharon saw the situation differently. She understood that what was at the core of their concerns was ‘longevity risk’ or the worry of running out of money over the course of their retirement. Longevity risk is one of about 15 types of risk which can affect returns on your investments. It’s probably the most common worry for retirees – and sometimes it’s not founded upon the reality of their situation. It became clear early in the Retirement Advice Consultation with Sharon that working through the Risk Tolerance Questionnaire would be helpful.
In brief, this is a tool our advisers can use with members to help them understand the way their super (and other savings) are invested, the level of risk associated and the ‘sleep at night’ factor – how comfortable members are with the way their money is invested. ( You can read the detail of this type of risk assessment here ).
What quickly emerged from taking Ben and Mary through the questionnaire was that their preferred risk level was one which Retirement Essentials labels a Market Risk Level 5, where they would hold 56% of their super in growth and 44% in defensive stocks. Sharon defines growth assets as international or domestic shares and property, while defensive assets are cash, term deposits and bonds. At the end of the questionnaire they received a report that confirmed Market Risk Level 5 to be their ‘sleep at night level’.