Many Australians nearing or, already in, retirement worry not only about how much super they have saved but also how long those savings will last them.
One of the biggest mistakes retirees can make is withdrawing their funds when markets are down. This can quickly erode retirement balances and make it challenging to maintain a comfortable lifestyle throughout what are likely to be several decades of retirement.
Some innovative retirement investments can help to manage some of these risks. One such option that is available through a Hostplus pension account is CPIplus, which is designed to offer greater certainty and smoother outcomes for retirees seeking dependable returns.
Stretching retirement savings in uncertain times
Market fluctuations are a daily reality for most investors. While shares and other growth assets can offer strong long-term performance, they are also subject to short-term volatility. For retirees who rely on regular withdrawals to fund living expenses, this volatility can be problematic.
Unlike investors in their accumulation phase who generally have a longer runway to build their balances, many retirees without alternative income sources rely on their super to provide a regular income stream. A significant market downturn at the wrong time, for example when their regular pension payment is due, can have a lasting impact on their retirement savings. This “timing risk” is of particular concern in retirement but it isn’t always given due consideration.
At the same time, very conservative approaches, such as holding most of your portfolio in cash, may feel safer in the short term but can struggle to keep pace with rising living costs over the longer-term.
How CPIplus is designed to help
CPIplus is designed to provide a balance of risk and return. It is an investment option specifically designed for the retirement phase and operates differently from other pension investments.
Returns from CPIplus are set in advance for the period at a level above inflation.* This design can help retirees plan their income with greater confidence, without the need to worry about what the markets are doing.
Rather than fluctuating daily with market movements, CPIplus return is not directly tied to the short-term performance of underlying assets. This helps to smooth out the effects of market volatility and reduce the risk that retirees have of selling their investments at a loss to fund regular pension payments.
By ensuring a additional level of return above inflation, CPIplus aims to maintain purchasing power over time. This is a key consideration for those relying on their super to fund their living in retirement.
More importantly, CPIplus has a daily return floor of zero, meaning retirees will never receive a negative return. This feature can be particularly reassuring during extended market downturns.
Supporting predictable retirement income
Retirement planning today is about having income you can rely on, not just growing your balance. Many Hostplus retirees choose predictable options like CPIplus to help support their regular pension payments and complement their other investments. With expenses often arising unexpectedly, having an investment designed to deliver more stable results can ease stress and help retirees feel more financially confident.
Structuring your portfolio with more certainty
Making your retirement savings last is about more than avoiding risk of capital loss or taking greater risk by chasing higher returns. Making your retirement savings last involves structuring your portfolio so that it helps protect you from adverse market events and provides a steady income over time.
For retirees seeking greater certainty, CPIplus is designed with these needs in mind. Available through a Hostplus Pension account, CPIplus’ pre-set returns, smoother performance and protection against negative outcomes aim to give retirees more confidence as they plan and manage their retirement income.
*Though returns above inflation are predetermined annually, Hostplus can shorten the return period. Hostplus may also adjust the rate of return with at least 30 days’ notice. You must have a Hostplus Pension account. General advice only. Consider the Hostplus Pension PDS and TMD available at hostplus.com.au, and your objectives, financial situation and needs, which have not been accounted for, before deciding. Past performance is not a reliable indicator of future performance. Issued by Host-Plus Pty Limited ABN 79 008 634 704, AFSL 244392 as trustee for the Hostplus Superannuation Fund ABN 68 657 495 890.