Q: I have $217,000 in super and also have a capital gains tax bill (CGT) due this year of approximately $60,000. Prior to Covid-19 I had approximately $239,000 and I was going to draw down the income each year to live off around $22,000, but that’s gone now and I am faced with looking for work at 62 (I’m a clerk) in a regional area. I moved my super to a capital secure investment in mid-March and since then it’s only grown $100! I can’t keep it there, I’ll be going backwards, and even more so when I pay the CGT. Do you have any ideas for me? I’ve read about the ‘three buckets’; cash, which is drip fed from a conservative investment bucket to a third bucket which is more active (and riskier) investment. I don’t have much money, I might well live to my 80’s and frankly, I’m scared.

A: I’m receiving a lot of questions like yours. Naturally everyone is increasingly concerned about financial market conditions particularly where there is such a high level of uncertainty. Prices in share markets around the globe are moving up and down on a daily basis at an almost unprecedented pace. This makes it very difficult to determine the appropriate time to be re-entering a market or alternatively exiting a market.

My personal experience suggests that it’s better not to try to “time” markets but instead remain invested for the long-term and ride out the inevitable variations whether caused by financial crises or health crises. I note that you moved your super to a capital secure environment in mid-March 2020. On that basis you exited share markets almost at the bottom as markets reached their low point in the third week of March 2020. Since then, the sharemarket in Australia has risen from around 4500 points to 6000 points at the time of writing. This is an increase of around 31 per cent. This shows why it’s better to remain in markets rather than moving to a more capital secure arrangement once markets have already fallen. As you note, your capital secure investment has only grown by $100, whereas a portfolio with a greater exposure to share markets would have risen much more significantly since mid-March. I know this is “cold comfort” but I have witnessed this occur many times over the last 35 plus years I have been observing markets. It’s “time in” markets rather than “timing” markets that pays off in the long run.

The important question, of course, is what do you do now? I don’t know what your financial position is other than the super you mentioned or what you need to live on. For example, do you own a home and/or have other investments apart from superannuation? Without this information it is impossible to give any specific advice about what you should do. Certainly, the idea of the three buckets is a commonly used one by financial advisers. It can help frame the right approach to managing your investments but it must consider all of your circumstances. You will be aware you are not eligible for the age pension until age 67 and after withdrawing $60,000 for your tax liability, on face value, it would be difficult to maintain a reasonable standard of living without some employment or other government support. It certainly would be a great help to some objective financial advice, however, you will need to be careful and ascertain the cost of any advice before proceeding.