Future thinking should be shared. With that in mind our team publishes insights weekly to help keep you in the (k)now.


Hewison Private Wealth - Insights
Hewison Insights
Self Funded Retirees
Reitree Income
Independent Financial dvice

Blog | Impacts of COVID-19 on self funded retirees

Glenn Fairbairn
Director/Private Client Adviser
5 Aug 2020

The financial implications of COVID-19 are far-reaching. With large parts of the country forced into lockdown during the past four months, many people have found themselves either unemployed or underemployed.  But what about self-funded retirees?

The Government acted decisively to cushion the impact for working Australians, with the introduction of the JobKeeper Payment, which was recently extended till March 2021. The JobKeeper Payment is designed to help businesses affected by the Coronavirus to cover the costs of their employees’ wages so that more employees can retain their job and continue to earn an income. 

As often happens during an economic or financial market downturn, Self-funded retirees, who may not qualify for government support, can see their retirement income reduce substantially. Not only does this affect their standard of living in the short term, but a prolonged downturn can lead to them drawing down on their asset base and jeopardise their long-term financial well-being. 

What are some key things you can do to survive the current downturn? 

1. Cash is King 

Although the current low-interest environment means it is the worst time in history to hold cash, it still forms an important part of any retiree’s portfolio. If you know that your cash holdings, combined with investment income is enough to meet your living expenses, you will not be forced to sell assets at the worst possible time and therefore preserve your asset base. I would suggest ensuring you have enough cash to make up any difference between investment income and living expenses for say two years. 

2. Cut expenses 

With travel restrictions and restaurant closures, many retirees have already noticed a marked decrease in personal expenditure. Making a concerted effort to reduce expenditure during a market downturn means that more capital is leftover to participate in the market recovery when it eventually comes. 

3. Rebalance your portfolio 

One of the key rules for any long-term retirement plan is to have an investment strategy that meets your short, medium, and long-term objectives. Your investment strategy should include an appropriate allocation to each of the major asset classes i.e. shares, property and fixed interest. I would generally recommend an asset allocation that can achieve a client’s objectives without exposing them to unnecessary risk.  

Having an appropriate asset allocation is never enough. It is important to actively rebalance back to your target asset allocation as markets fluctuate. Sticking to this rebalancing discipline means that you are topping up assets when markets fall and trimming profits as they rise. This takes the guesswork out of investment decisions and ensures that you are following one of the key investment principles of buying low and selling high. 

4. Do not panic 

All that extra time in retirement can be a curse in volatile markets. Having more free time gives you more opportunities to obsess over your falling portfolio and follow every piece of news necessarily mean knowledge and remember bad news sells. Don’t panic. Stick to your strategy and don’t over-obsess about your portfolio. 

5. Speak to your Adviser 

If you are sitting up late at night worrying about your portfolio, pick up the phone and speak to your adviser. Things may not be as bad as they seem, and your adviser may be able to explain the strategy they have in place to enable you to weather the storm. If you are not receiving open, honest communication from your adviser, it may be time to consider your options. It is during these times that they will really prove their value. 

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.