Loss of superannuation value in stock market crash may not be cause for panic, experts say
There is heightened anxiety among some Australian pensioners amid a recent plunge in the Australian equity market.
- Movements in the equity market have an impact on the superannuation as the two are closely linked
- Financial experts say the quality of popular Australian stocks has not changed and the value will likely rebound
- Australian equity market could see further declines if US enters recession
Margaret and Doug Walsh knew their super would be hit by the latest downturn. Doug, a 20-year-old retired teacher, says his fund has so far fallen 7%.
But the couple aren’t too worried, having weathered previous financial storms, including the GFC.
“It’s not something that worries me because they always come back, in fact the market gets better every fall,” said Doug, 77.
It’s an attitude that financial experts say is healthy. Their advice is for other retirees to learn from Walsh’s book.
“While the value of the stocks has gone down, the quality has not. And eventually the values will go up to reflect the quality of the assets,” explained independent financial adviser Nick Bruining.
Since the RBA raised rates earlier this month and amid fears of higher interest rates in the United States, some $270 billion has been wiped out of the Australian stock market.
As the retirement pension is closely linked to the stock market, this means that retirees face chunks taken out of their nest egg.
In fact, this fiscal year will be only the fifth time in three decades that workers will see losses to their pension funds.
“Some people will be very worried. I’d like to think that most people in our age bracket aren’t completely and solely dependent on the stock market,” said Ron de Grunchy of WA Self Funded Retirees.
“I don’t see this as a major disaster – yet. That said, who knows where the bottom will be,” he warned.
But Bruining encourages retirees to hang in there no matter how badly the ASX falls.
“We are talking about companies with real assets, Woolies, BHP, Commonwealth Bank. Woolies stores are still open for business, BHP still has its iron ore reserves in the ground, the quality is still there and ultimately the price will reflect quality,” Bruining said.
Margaret Walsh, who is currently national vice-president of the Association of Independent Retirees, believes that knowledge is power.
She says many of her members have expressed concerns about the current situation, but she encourages them to learn more about how their super is being run.
“The reality is that the super goes up and down over cycles and we just have to be patient,” she said.
“After 11 years of retirement, I have a higher balance than I started with, even after withdrawing and even after the impact of COVID,” Ms. Walsh explained.
But that can be hard for people to keep in mind when looking at their super slide.
Experts say Australia’s equity market could see further declines, amid the risk of a US recession.