The coronavirus has wiped the value of my super, should I be worried?

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With the sharemarket experiencing record losses, it’s little wonder that many people are worried about their super. Many of us are seeing our super balances drop significantly, which can be sobering to say the least. So, should you be worried?

Super funds don’t just invest in shares

It’s important to remember that most super funds don’t just invest in shares, with many super funds holding a percentage of their investments in assets such as bonds, infrastructure and private equity. So while the state of the share market is worrying, the risk for super funds is spread.

Markets will recover in the long-term

If you’re not close to retirement, don’t panic, the share market will recover in the long-term. While it can be nerve racking to see your super balance dropping, you can be confident that it will recover over time. If you are in your 30’s, 40’s or 50’s with an investment timeframe of 15-35 years +, you should feel comfortable letting the natural course of events take place.

What if I’m closer to retirement?

If you’re closer to retirement you unfortunately don’t have as much time on your side, so you may need to pivot. You may want to consider reallocating some of your super into more conservative or lower risk investments if your fund allows it. You may also want to invest outside of super to spread the risk, for example by investing in property. Another option is to build up a cash buffer. Talk to your financial planner to come up with a strategy that best meets your needs.

What else should I be doing?

• If you’re paying fees of more than 1% to your super fund you should consider moving to another fund. Moving from a higher priced superannuation platform to a more efficient superannuation platform can be worth in excess of $100,000 in savings for a 40 year old until they retire.

• If you have a self managed super fund (SMSF) you have wider flexibility when it comes to choosing your investments i.e you can potentially diversify into property. It could be a good time to revisit your investment strategy to make sure it is still working for you. Talk to your financial planner about whether setting up an SMSF may be a good option for you.

• Now is a good time to review your insurances such as income protection, life insurance and TPD insurance. Make sure you’re covered. If you haven’t already, you can move these costs into your superannuation. The costs will be paid from your superannuation balance, freeing up your cash flow. Talk to your financial advisor to see if this is the right option for you and to discuss the impacts.

• If you’ve got access to surplus funds and your personal situation is secure, now could be a good time to make additional contributions to your super and access investments whilst the market is down. This strategy could be suitable as a tax planning and investment strategy for the right individuals.

As always you should speak to a financial planner to discuss any effects these decisions could have on your personal financial circumstances.

About David Hancock
David Hancock is a director and Senior Financial Planner at Montara Wealth. His role is to oversee the running of the business and ensure the delivery of exceptional service and strategic based advice to clients. David is well known for developing strong long-term relationships with clients and is passionate about helping them identify and implement life changing financial strategies.