Money
I’m not panicking about a global recession (but I am reviewing my super strategy)
Feeling nervous about your super right now? You’re not alone but a few smart moves can help protect your retirement savings and your peace of mind.
By Carolyn Tate
Do you get the feeling your superannuation isn’t quite as secure as it was a year ago? Global stock markets have been fluctuating among rising geopolitical tensions lately, and for those of us who are retired, or nearing retirement, it’s understandable we’re concerned about keeping our nest egg intact.
So, should we be worried? And are there actions we should be taking? Let’s take a closer look at current global recession concerns and what you can do to protect what you’ve worked so hard to save.
What's driving current global recession concerns?
There are a number of factors causing experts to speculate about an increased risk of a global recession, but the key driver is global stock market volatility caused by US President Donald Trump’s recent tariff regime announcements. In Australia, the ongoing threat of bank rate hikes as well as signs of faster wages growth are also contributing to recession talk.
How a recession can affect your retirement savings
With over $4 trillion currently invested in super in Australia, a volatile stock market can wreak quite a bit of havoc on retirement savings. That’s okay if you’ve got time to ride it out, but if you want to pull out your savings and use them, it can be concerning.
During a recession it’s common to see superannuation balances fall due to declining markets, according to Rommel Alcera of EndureGo Tax. It’s also common to see investment returns weaken, rising inflation cut into purchasing power and a lot of fear-driven decision making.
“For retirees relying on regular income from super, these shifts can be worrying,” Alcera says. “From our perspective as accountants and tax advisers, we’ve seen how recessions can put serious pressure on retirees. Investment values fall. Living costs rise. Confidence in long-term plans can quickly start to shake.”
Paul, a retiree from Sydney, saw his savings start to disappear during the 2008 global financial crisis. He says he is worried about it happening again.
“Now that I’m no longer working, I don’t have the luxury of waiting for the markets to bounce back, nor do I have the security of an incoming salary to help rebuild my portfolio,’ he says. “It feels like all we can do right now is hope that the diversified strategy we implemented will be enough to see us through without having to make too many changes.”
Smart strategies to protect your super
If, like Paul, you’re concerned for the state of your super, Alcera recommends focusing on 4 important areas:
1. Review your investment strategy
Ensure your super is allocated appropriately for your stage of retirement. A balance of defensive and growth assets may protect you while still allowing long-term growth.
2. Manage your withdrawal rate
Withdrawing too much during a downturn can deplete your balance more quickly. A superannuation adviser can help calculate a sustainable income stream.
3. Optimise for tax
Even in retirement, tax still matters. Structuring your pension account correctly and understanding your tax-free thresholds can improve your cash flow.
4. Plan for the long haul
Recessions come and go, but retirement can last 20-30 years. Planning beyond the short term is key to preserving your lifestyle.
More on this: 5 proven investment approaches for wild markets
Alcera also says it may not be wise to rush into cash, which locks in losses and can harm long-term growth. He also recommends staying diversified, considering downsizer contributions, and holding off on large purchases until markets recover.
Another approach Alcera recommends is a ‘bucket strategy.’
“Divide your super into short-term (1–2 years), medium-term (3–5 years), and long-term (5+ years) buckets,” he suggests. “This keeps your income stable without needing to sell growth assets at a loss.”
When to seek professional advice
If you’re feeling concerned about your superannuation, seeking advice from a qualified and registered financial adviser is never a bad idea. This is especially true if you are in ‘the retirement risk zone’ – the decade or so either side of retirement.
Be sure to work with a professional who is well placed to offer personalised advice based on your individual circumstances and goals. Once you’ve found an adviser you trust, Alcera recommends regular reviews.
“Recessions are dynamic,” he says. “Your financial strategy should be too. Meeting regularly with a trusted expert ensures you’re always one step ahead.”
Beyond the headlines: Why there’s no need to panic
Markets will always go through periods of volatility and it’s important not to panic even if you feel like you don’t have the luxury of waiting for them to recover. There are many strategies you can put into place to get the best outcomes possible, regardless of the phase of life you’re currently in.
“Superannuation is complex, even more so when economic pressures grow,” says Alcera. “But you don’t have to figure it out on your own. The right advice can help you protect what you’ve worked hard for, make informed choices, and feel confident about the years ahead.”
Feature image: iStock/Porta
This article reflects the views and experience of the author and not necessarily the views of Citro. It contains general information only and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their personal circumstances before making any financial decisions.
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