Having enough for retirement

The rapid and unpredictable developments of COVID-19 has led to a lot of share market ups and downs over the last few months, commonly referred to as volatility. Because of this some members may be concerned that their account balance is going up and down, especially if getting closer to retirement. It may sound tempting to switch from an option with a higher expected return into a lower expected return option to try to prevent your super balance going down in the short-term. However, by changing your investment option to preserve the balance you have built, you may reduce how much it goes up over the long-term; negatively impacting your retirement outcome.

The Cash Savings option might remove short-term ups and downs and feel like your account balance is ‘safer’, but by having a lower average long-term return you are increasing the risk that your retirement saving don’t last as long - this is known as longevity risk. The graph below illustrates the difference in how long your retirement savings might last when invested in Cbus’ default options^ compared to the Cash Savings option with a lower expected return. 

What this shows is by being invested in the Cash Savings option you can miss out on the higher expected returns of the default options and would be increasing your ‘longevity risk’ that might mean that your retirement savings run out too early.

It is important to maintain a longer-term focus when considering your super and not let short-term market movements influence long-term investment goals. While share market movements may cause your balance to go up or down in the short-term, events like this are expected to occur from time to time and Cbus' investment options have been constructed to reflect this.

These figures are for illustration purposes only and do not take into account tax, fees, insurance, contributions, or any government benefits. Investment returns are based on the investment objectives of each investment option using the RBA Cash Rate and the 10-year average for inflation as at 31 March 2020 with a starting age of 50, starting balance of $200,000, invested in the Growth (Cbus MySuper) option^ and switching into the SIS Conservative Growth (default) option^ when retired at aged 67 compared to switching into the Cash Savings option at age 60. Drawdown calculations are based on the ASFA modest retirement standard indexed to the average inflation over the past 10 years.

This article is about Cbus and doesn’t take into account your specific needs. You should look at your own financial position, objectives and requirements before making any financial decisions. Read the relevant Cbus Product Disclosure Statement to decide if Cbus is right for you. Call 1300 361 784 or visit cbussuper.com.au for a copy. Past performance isn’t a reliable indicator of future performance.