Answers to your COVID-19 super questions

This was published 6 months ago

Answers to your COVID-19 super questions

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As we see the impact that COVID-19 has had on to markets and economies, it’s natural to wonder about its impact on our retirement savings. Here’s what some experts have to say about superannuation in uncertain times.

Experts shed light on Australian's superannuation concerns amid these uncertain times.

Experts shed light on Australian's superannuation concerns amid these uncertain times.Credit: Supplied.

What has been COVID-19’s impact on the retirement nest eggs of everyday Australians?

COVID-19 has affected everyone’s retirement savings. The extent of the impact depends on your age, the type of investments you own and other underlying circumstances. Those with limited savings outside superannuation or without their own home, and who are out of work, have been hit hardest. Many have had to access their super early.

A reduced super balance, combined with a lengthy period of no super contributions from an employer, can have a lasting impact. Younger people have more time to rebuild their balances. But for those approaching retirement, it is challenging. We would advise this older demographic, if they can, to avoid accessing their super early or changing investments while the market is so turbulent. It is best to stay the course and be positioned to benefit from the market rebound.


COVID-19 has been a timely reminder about the purpose and long-term nature of super, and the importance of appropriately diversified investments. Within a 20-year period, it is normal to have three or four years in which investments perform poorly. Unexpected events can hit at any time, so it is good to check that your asset allocation within your super is appropriate for your age and risk tolerance.

This pandemic also serves as a reminder to set aside emergency funds if you have the means, ready to access if things get tough.

Is the worst behind us? How confident can we be that markets and our superannuation savings are in recovery mode?

Market instability will continue for some time. The coming US election, geopolitical tensions and potential new outbreaks of COVID-19 around the globe represent significant uncertainty for markets. And we are yet to see the full impact of the COVID-19 shutdown on the Australian economy given the federal government’s temporary economic support measures.

As we scan for signs of recovery, key indicators to watch for include improvements in unemployment figures and household spending in Australia and other developed markets. Significant improvement in these may be a year or more away. A rapid recovery would rely on a COVID-19 vaccine.

While this outlook may seem a little bleak, it is important to remember that the long-term trend for markets is positive. Market declines and volatility are not unusual. After major shocks, markets have always recovered. We advise Australians to ride out the volatility where possible and remain patient. If they are concerned, they can seek personal advice through a financial adviser or general advice through their super fund.

What risk management strategies should people aged 40-plus be considering in the wake of COVID-19?

The best course of action depends on the strategies people adopted in early 2020. Those who reweighted their superannuation to favour lower-risk, lower-return assets, such as fixed interest and cash, should think carefully about their next move. Slowing economic activity and the risk of a second wave of infection are two reasons they might want to wait before gradually reintroducing equities and other growth assets to their investment mix.

Others, who kept their weightings in growth assets, risk locking in losses if they change course. Market shocks tend to happen every five to seven years, and though COVID-19 has been a big one, in 20 years it will be a blip on the charts.

For people in their 40s, time is on their side and long-term investment returns of 6-7 per cent should prevail.

As retirement approaches, risk tolerance changes. That’s why it’s important to understand your financial position and the cost of your desired retirement lifestyle. This is where financial planners can help.

When you have a good handle on where you are and where you want to be, you can plot an investment course to carry you through market shocks and help you sleep easier at night.

A clear lesson from COVID-19 is the benefit of saving for a rainy day. A lot of people may not have the capacity to save at the moment, but those who can should try to save the equivalent of 3-12 months of net income to cushion against future personal or economy-wide shocks.

MLC helps people create a better financial future. Our wealth management expertise means we understand how to help you meet your needs today, set your goals for the future and support you along the way. Our approach is holistic – we’ll give you a better insight into your financial opportunities, and access a broader range of services. We’re here to help. Download our free retirement guide to understand what today’s world means for your finances. Find out more.

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