Considering risk is a key part of planning and managing your savings in the lead up to and throughout retirement.

Increased life expectancy, the ups and downs of investment markets, and the rising costs of living are just some of the factors that can impact your lifestyle in retirement.

Being aware of these risks, and the actions you can take to lessen their impact can help you take more control of your retirement.

Four key retirement risks

Sequencing risk

Investment markets are constantly fluctuating, which, in turn, can impact the value of your retirement savings. The timing of these ups and downs, and when they occur in your super journey can impact your retirement savings.

When you’re building your retirement savings, your investments will typically recover over the long term after a market downturn. However, if periods of negative returns occur when you’re just about to retire or in the first few years of retirement (when the balance of your retirement savings is higher), it can make a real difference to how long your savings could last compared to the same losses occurring later in retirement when your balance is lower.

This is known as sequencing risk.

One way the impact of sequencing risk can be managed is by using a bucket strategy which has an allocation in cash and growth assets. Maintaining an allocation in a 'cash bucket', can be used to draw down payments in the early years of your retirement. This minimises the need to draw down from your growth bucket in the event of a market downturn, providing time for the investments to recover.

Market risk

When you’re no longer working and you’re relying on payments from your retirement savings as all or part of your income to live on, the ups and downs of investment markets come more into focus. Investments with higher volatility and large fluctuations in their value can result in larger variations in returns and may negatively impact the value of your investments.

Again, your investment strategy will play an important role in helping to protect against ups and downs. Diversifying your retirement savings across both defensive assets with lower volatility, such as cash and fixed income, and assets with the potential for long-term growth, such as shares, property and infrastructure, can help to smooth your returns over time and help manage the impact that market risk can have on your retirement savings.

If you’re concerned by market movements, our risk attitude quiz is available in Member Online and can help you find out if your risk appetite matches your investment choice.

You might also wish to consider investment options that have been specifically designed to reduce the level of market volatility, such as our Retire Plus option. This option has been included in the Income account default investment strategy. You can learn more about this option, or the new Income account default investment strategy.

And don’t forget to talk to your financial adviser before you take any action regarding your current investment strategy.

Longevity risk

We’re all living longer, which is great news, but maybe not so great for your retirement savings. Most of us can expect to live into our early to mid-80s1, so increased life expectancy means the risk of outliving our retirement savings is very real.

With potentially 20-plus years beyond retirement, your investment strategy can be one way to manage longevity risk. Maintaining an appropriate allocation to growth assets such as shares and property that typically provide growth over the long-term can help to extend your retirement savings.

You may also wish to consider other sources of income aside from your super, such as other investments or the government Age Pension. You may wish to consider retirement products that pay a regular income stream for life, such as an annuity.

And of course, budgeting and understanding your living expenses will play a key role in helping to ensure your retirement savings last the distance.

1 Information sourced from

Inflation risk

Retirement is a great time to enjoy your hard-earned retirement savings. But with inflation and cost of living pressures, there is the risk that investment returns on your retirement savings won’t keep up with the cost-of-living. As your spending power is reduced it can impact your retirement lifestyle.

Many retirement products, such as NGS Transition to retirement (TTR) and NGS Income account offer a pension payment feature which allows you to increase your payment amount to adjust for inflationary increases. You can increase your payment amount based on a nominated percentage you select or in line with the CPI. You can select to increase your payments by completing the Request to vary your income stream payments form or by logging into Member Online.

Inflation risk can be managed by choosing investment options with appropriate diversification across defensive assets to provide an income and assets that have the potential for long-term growth, such as shares, infrastructure and property.

Other things to consider

  • Timing of your retirement. Your savings can be particularly impacted in a market downturn.
  • Diversifying your investments across different asset classes to help smooth returns over time, reduce the risk of negative returns and provide opportunities for growth over the medium to long term.
  • A strategy for drawing payments from your retirement savings. For example, a bucket strategy allows you to draw short-term income from a ‘cash’ bucket (particularly in the early years of retirement), while leaving the bulk of your retirement savings in a ‘growth’ bucket that can recover from market downturns and are invested for longer term growth.

Do I need advice?

Preparing for retirement can seem daunting, but it doesn’t need to be. Getting help from an expert can give you security and confidence about what’s ahead. A financial planner can create a plan that suits your goals and circumstances, so you can make the most of your personal situation. At NGS, we have a team of Certified Financial Planners® accessible to both NGS and non-NGS members. Your first appointment is complimentary, with no obligation to continue if you feel it’s not for you. Find out what you can expect from a financial planning appointment, or request to book an appointment online. Before making a decision please also consider our General Advice Warning.

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