Pre-retirees have long investment time-frames – with decades in retirement invest – and so can afford to be in riskier assets to achieve the expected higher returns over the long term, McIlroy said.
In early 2020, the S&P/ASX 200 Index fell more than 35 per cent in just 22 trading days before recovering the pandemic-induced losses shortly after. “Those who switched to [their super fund’s cash option] when markets dipped in early 2020 would have crystallised their losses and missed out on the rebound, leaving them worse off in retirement,” he said.
Bernie Dean, the chief executive of Industry Super Australia, said it was natural for fund members to be concerned about the impact of inflation and interest rate on their savings retirements.
“But it’s important to remember that super is a long-term investment and that markets have a habit of recovering after downturns,” Dean said.
Market analysts say rising inflation and higher interest rates could extend the current bout of volatility.
Reserve Bank of Australia (RBA) governor Dr Philip Lowe said annualised inflation could reach 7 per cent by the end of this year, from 5.1 per cent in the 12 months to the March 2022 quarter.
A strong jobs report from the Australian Bureau of Statistics this week has markets expecting the RBA to lift the cash rate by 0.5 percentage point early next month, after lifting the cash rate by the same amount earlier this month.
Jamie Hannah, deputy head of investments and capital markets at VanEck, said global equity markets remain vulnerable, especially the tech-heavy US market, as interest rates rise around the world.
Australia’s resources heavy sharemarket could do better because of rising commodity prices, he said.
Chant West’s Mano Mohankumar said despite the recent volatility that super returns were holding up very well over the long term.
The typical growth option has produced an average annual compound return of about 7.9 per cent over the past 10 years.