Protect your savings in uncertain times

While you can’t set your calendar to its rhythm, one economic reality is that a boom, or at least a period of stability, will be followed by a crash. 

When that happens, a period of rebuilding occurs. 

But as we get older, there’s less time to wait for those good times that are “just around the corner”. 

With many retirees relying on their superannuation and other investments, safeguarding these funds is critical to ensuring a comfortable and secure retirement. 

Here are some practical strategies you can use to protect your hard-earned savings and navigate financial volatility. 

A fundamental rule in financial planning is diversification, which involves spreading investments across different asset classes to reduce risk. Many retirees have their savings in super funds, which typically include a mix of shares, bonds, property, and cash. 

Diversification ensures that a downturn in one area, such as a drop in the stock market, does not significantly affect the entire portfolio. By balancing high-risk and low-risk assets, you can smooth out market fluctuations and protect your overall savings. Financial advisors recommend regularly reviewing your portfolio to ensure it remains aligned with your risk tolerance, especially during times of uncertainty.

An emergency fund is crucial for handling unexpected expenses, such as medical bills or home repairs. Financial planners advise having enough savings to cover three to six months of living expenses in an easily accessible account, such as a high-interest savings account. 

An emergency fund prevents retirees from being forced to sell long-term investments, such as shares or property, during an economic downturn. It acts as a financial buffer, ensuring that short-term needs are met without impacting long-term savings. 

Carrying debt into retirement can place an unnecessary strain on savings, especially during times of rising interest rates or economic instability. High-interest debt, such as credit card balances or personal loans, can quickly erode retirement funds if not managed properly. 

Seniors are advised to reduce or eliminate high-interest debt before retiring. By cutting back on discretionary spending and avoiding taking on new debt, you can preserve more of your savings. 

Fixed-income investments, such as government bonds and term deposits, provide a reliable income stream with less risk than shares. During times of market volatility, these investments offer stability and can help you protect your savings from significant losses. 

Although fixed-income products generally offer lower returns compared to shares, they provide certainty in uncertain times. 

Superannuation is a cornerstone of retirement savings for Australians. However, its performance can fluctuate depending on market conditions. 

You should regularly review your super fund’s investment strategy, particularly during periods of economic uncertainty. 

You may choose to shift to a more conservative investment option, reducing exposure to riskier assets such as shares and increasing holdings in bonds or cash. 

Many super funds offer tailored options for retirees to ensure their investments are better aligned with their goals and risk appetite. 

Navigating financial markets and protecting savings is complex. Seeking advice from a qualified and registered financial planner can help you make informed decisions about your retirement strategy. 

Financial planners can assist with creating a tailored investment portfolio, managing risk, and developing strategies to protect savings during economic downturns.