For many Australians, the prospect of running out of money in retirement is a significant concern. Without the regular employer contributions that boost superannuation balances during working years, retirees are more vulnerable to financial shocks. Here, we explore some of the biggest risks to your super and how you can proactively manage them to safeguard your financial future.

Inflation

Inflation is a persistent challenge for retirees. Even modest increases in the cost of goods and services can erode the purchasing power of your superannuation savings. Recent economic trends have shown that inflation can remain high despite interventions by central banks.

Tips to manage inflation risk

  • Adjust spending habits during periods of high inflation by identifying and cutting non-essential expenses.
  • Avoid making investment decisions driven by panic; chasing risky assets to “beat inflation” can backfire.
  • If possible, make additional contributions to your Super to help offset inflation’s impact.
  • Consider delaying retirement or supplementing your income with part-time work to reduce the strain on your savings.

Market downturns

Market volatility is an unavoidable reality for anyone with superannuation invested in shares or other growth assets. While downturns can be nerve-wracking, reacting hastily often does more harm than good.

Tips to manage market downturns

  • Avoid rash decisions during market volatility, such as moving to conservative options prematurely.
  • Time large withdrawals carefully, especially for major expenses like paying off a mortgage or purchasing a car.
  • Regularly review your super’s investment mix to ensure it aligns with your risk tolerance and goals.
  • Ensure your overall portfolio, including non-super investments, is well-diversified.

Longevity

Australians are living longer, with many retirees needing to stretch their savings over 30 years or more. Inflation, healthcare costs, and unexpected expenses can make this even more challenging.

Tips to avoid outliving your savings

  • Make extra contributions to your super during your working years, taking advantage of tax benefits where possible.
  • Delay retirement or take on part-time work to boost your savings and extend their longevity.
  • Create a detailed retirement budget and identify areas where you can reduce expenses.
  • Explore additional income streams, such as the Age Pension, to supplement your Super.
  • Consider the timing and impact of early inheritance gifts to children, ensuring your retirement lifestyle isn’t compromised.

Rising medical costs

Healthcare expenses tend to increase with age, encompassing everything from regular GP visits to specialist care, surgeries, and aged care services. These costs can significantly affect retirement savings if not planned for.

Tips to manage medical costs

  • Prioritise preventive care by maintaining a healthy lifestyle and undergoing regular health screenings.
  • Maintain an emergency fund specifically for unexpected medical expenses.
  • Use tools like the government’s Medical Costs Finder to estimate out-of-pocket expenses and plan accordingly.

Scams and fraud

Cashed-up retirees are prime targets for scammers who employ increasingly sophisticated tactics. Scams can range from impersonating trusted organisations to elaborate schemes designed to steal superannuation savings.

Tips to stay safe from scams

  • Be wary of unsolicited messages or calls that pressure you to act quickly, especially regarding financial matters.
  • Verify the authenticity of communications by contacting organisations directly using their official contact details.
  • Remember that early access to Super is strictly regulated—don’t trust anyone who claims they can help you withdraw funds prematurely.
  • Be cautious about sharing personal information or engaging with individuals who request money or promote investment opportunities unexpectedly.

Proactive planning: your best defence

Managing these risks starts with a solid financial plan. Regular reviews of your superannuation strategy can help you stay on top of potential challenges and take advantage of opportunities to protect and grow your savings.

At Halpin Wealth, we specialise in helping people optimise their retirement savings. Whether it’s tailoring your Super portfolio, planning for longevity, or managing risk during market volatility, our advisers are here to guide you.

Contact Us to schedule a consultation and ensure your Super is ready to go the distance.

Written and accurate as at: Dec 13, 2024

This information provided in this article is general advice only and has been prepared without taking into account your own objectives, financial situation or needs. Before making a financial decision based on this advice, you must consider whether it is appropriate in light of your own needs, objectives, and financial circumstances, and where relevant, obtain personal financial, taxation or legal advice. Where a financial product has been mentioned, you should obtain and read a copy of the Product Disclosure Statement (PDS) prior to making any decisions about whether to acquire a product.