I’m worried about my retirement during COVID-19 – what can I do?

Last updated on 27th May, 2020 at 12:42 pm

All around the world markets have plummeted due to the impact of COVID-19, sending shockwaves around the investment community. If you have investments dedicated to your retirement or are even close to retirement age yourself, there’s good reason to be concerned. So, what can you do?

Don’t panic, and speak to your planner

Investment markets tend to go through different cycles. Markets are typically characterised by bull (upward) and bear (downward) cycles, so these movements are quite ‘normal’ for investors to experience.

Ryno Oosthuizen, business development manager at Glacier by Sanlam, explains that what sets this crisis apart from previous market events is the panic, fear and indiscriminate selling that have taken place over the last couple of weeks globally due to COVID-19.

He says: “The best advice one can follow is to not make any sudden changes to your investment strategy, and to consult your financial planner.” Managing your retirement during COVID-19 requires expert, personalised advice – your financial planner is best placed to help you make the best decisions in the current climate.

Don’t disinvest

Given the fact that your portfolio has probably taken a knock, it’s understandable that you may feel panicked. But it would be foolish to disinvest now.

Oosthuizen explains: “The first thing a client should do before making any changes to their investment or strategy is to consult their financial planner for their views and input. The worst possible thing any investor can do is to disinvest or suddenly and drastically change their investment strategy.”

Simply put, if you withdraw all your money now, you could potentially lose out on any sudden market upswings the minute things start to stabilise after the pandemic has been contained. It is an emotional time, but your retirement investments could still make a come-back once things return to normal.

Don’t stop making retirement contributions

During this troubling time, it may feel prudent to stop making contributions towards your investment. But this plan could also backfire. Oosthuizen says: “The silver lining is that investors benefit from ‘rand cost averaging’ with any recurring contributions into the fund. Any new contributions made into the retirement fund when prices are depressed results in the investor buying more units, as the number of units are a function of the rand amount invested and the current unit price.”

In other words, you’re buying more shares at a cheaper price, and when markets bounce back you will benefit in the upturn.

Find out if your financial planner spread your risk

When you invest you would typically have your money in more ‘aggressive’ assets such as stocks and shares so that you would benefit from better growth over the years. But you should also have some money in more conservative assets such as money market and bond funds. This would help spread the risk in the event something happens.

Oosthuizen explains: “The majority of clients are invested in multi-asset funds within their pension, provident or retirement annuities. These investment portfolios are spread across a range of different asset classes, some of which would provide the investor with some protection during a market downturn.

“The best thing to do is to leave the asset allocation decision to the professionals and have regular check-ins with your financial planner to make sure the investment plan, which is in place, is still relevant.”

Protect your capital

There’s no doubt that retirees drawing an income from their retirement proceeds will also be affected by this sudden movement of prices. But Oosthuizen points out: “Typically, your asset allocation is less aggressive post-retirement when comparing it to the build-up phase in pre-retirement.

“The volatility in these portfolios and subsequently the market movement in these portfolios are typically more subdued when comparing it to a portfolio that is fully invested in equities.”

In other words, as you approach your retirement and as you live through your golden years, your money should be invested in assets and funds that will protect the bulk of the capital. It’s now essential to not draw out too much. “Ensuring your income does not exceed the recommended withdrawal levels for you as well as your spouse can ensure longevity of the capital,” adds Oosthuizen.

Worried about your investments? Speak to an expert financial planner who is best placed to advise you based on your personal portfolio, needs and risk. Click here to set up a meeting, which can be via phone call.