Battlers on market front line

Recent retirees are the group of Australians most vulnerable to the market fluctuations of recent years.

Recent retirees are the group of Australians most vulnerable to the market fluctuations of recent years.

HARRY Bouwmeester is 62. He's healthy and highly qualified as a maintenance fitter. He can fix things expertly. He gets on well with people and he's a hard worker. He's in a category that some would elevate to the status of a ''national treasure'', an older Australian with decades of experiences who is willing and able to stay on the job, contributing to the economy and to the financial and social well-being of his Melbourne family. In many respects he considers himself lucky.

This is more than can be said for his situation in 2008 when the global financial crisis wiped $30,000 from his savings - and indirectly cost him a job he sorely wishes he had kept. One thing that can be said of his life these days is that he does not have to worry about the sharemarket carnage triggered by the European debt crisis and US financial problems that by last weekend had wiped tens of billions from Australian superannuation funds. Back in 2008, Bouwmeester took a devastating hit that made him totally risk-averse, meaning he views the latest market drops with a relative lack of interest.

This does not mean you could by any stretch of the imagination call him a financial winner.

As a recent retiree, Bouwmeester is among the group of Australians most vulnerable to the market fluctuations of recent years, and for whom the latest turmoil may well further erode retirement savings already battered three years ago. Some of them have learned valuable lessons from 2008 and look likely to emerge from the latest upheaval relatively unscathed. But among a generation that prided itself on its financial sobriety and commonsense, the volatile markets and very low to negative super returns in recent years have created an army of new battlers, people who never thought they would have to survive on the pension because they were so financially well prepared for retirement.

Bendigo-based Linda McCabe and her husband, both in their early 60s, lost well over $100,000 - 50 per cent of their super - in the previous financial crisis. ''It hurt. It was a big hit. We were planning to retire,'' McCabe says.

Travel plans were put on hold. They worked hard, pumping as much as they could as salary sacrifice contributions into super. Twelve months ago they saw worrying signs that indicated further market troubles. This time around, however, they were better prepared. They sought a haven by moving investments into cash ''and hoped to hell it would go well ? We have been pretty lucky,'' McCabe says.

The latest rout wiped $135 billion in a week to last Tuesday from Australian markets, spreading panic among some investors. Markets recovered, clawing back much of the losses. By yesterday afternoon markets in Australia, New York, Germany and France saw traders continue the move back into equities, with the markets rising. The S&P/ASX 200 index rose from 3986.1 on Monday to 4190 by yesterday afternoon (the index reached 4971.2 points in April - its highest point this year).

Again the message from the superannuation industry was to stay calm and sit tight.

Brian Rogers, chairman and chief investment officer of T. Rowe Price Group, which has $US521 billion under management, emailed his investors this week that while this market chaos was a ''perfect storm of political dysfunction, slowing economic growth, and the debt downgrade, the market backdrop is very different from that of 2008 when we were truly in the cross-hairs of a global financial crisis''.

For Gordon Weller, 78, a retired farmer, and former president of the Association of Independent Retirees, the most important lesson he has learned in his investment life is diversification. He says he does not worry about the financial crisis because he has spread his investments across stocks, cash and property.

When he was 17 and farms were worth small fortunes due to currency changes, he saw many locals sell up and become rich. But within a few years the economy had changed, and those people had spent the money and ended up looking for jobs to maintain their living standards, working ''as flunkeys who had to sweep the floors in factories ? That was an abiding lesson for me''.

Weller could have sold his farm and put the money into a superannuation fund when he retired 10 years ago. Instead he rented it out. ''I learned a lesson [at 17] and retained the farm. I am not worried because of the mix I have ? Had we sold the farm, we would have problems today. I would be like those fellows who had to go back and sweep the floor,'' he says.

While some, like Weller, are doing quite nicely, having studied the markets for years, making conservative investment decisions and, above all, not panicking, others, such as Bouwmeester have not been so fortunate.

Back in 2008, Bouwmeester was earning good money and salary sacrificing $200 a week to super. After migrating from Holland in 1974, Bouwmeester had worked hard and saved. He was with the same company for 20 years and loved his job. He owned a house in Noble Park North and raised two sons, one of them severely intellectually handicapped.

The dream for Bouwmeester was retirement at 65, a trip to Holland in 2014 for the 70th birthday of his twin sisters, a new car to replace his 1992 Commodore, about $500,000 in super, from which they would spend about $30,000 a year, a two-week trip once a year during the Melbourne winter to the sun in Australia, and time with the grandchildren.

The markets, however, had different ideas, and that was also when Bouwmeester made his first big mistake. He did what a lot of people do when superannuation funds drop significantly - he took actions he wishes he could now reverse. Thinking he knew a way out of the trouble, he asked for a voluntary redundancy. Because he was a valued worker he was refused several times. He persisted and finally got the payout, which he had planned to contribute to super to make up for the losses. At 59, he figured he would easily get a new job. In the meantime his fund had dropped another $7000. Bouwmeester estimates that from 2005-08 his fund should have grown by $50,000. It dropped by $37,000.

He also decided to cut his losses and put a considerable portion of his and his wife's super into a capital protected fund earning just 1.4 per cent - while the money is no longer prey to the vagaries of the sharemarket, what this means in effect is that he is losing money every year because of inflation. He put the rest of the money into cash at 6.5 per cent interest a year. He lives on the interest, along with his wife's earnings. According to Bouwmeester, they scrape by. He does not have a financial adviser, largely because of fees, such as the 1 per cent of his capital one adviser said it would cost him to invest.

In retrospect this might seem a false economy. Median balanced funds returned 8.7 per cent to the end of June 2011, and 9.8 per cent the previous financial year. But Bouwmeester still views his revised investment strategy as ''the better of two evils''. Losing about 1.5 per cent to 2 per cent because of inflation, he maintains, is far better than losing tens of thousands a year if the market continues to go south.

''My capital is now protected,'' he says. ''I would have lost a bundle had I stayed in [the market].''

But the biggest blow for Bouwmeester - and the one that has so undermined his retirement strategy - was counting on getting that next job. His entire strategy was predicated on getting work and continuing to pump money into super for another few years. But he could not get a job and most of the redundancy payout he had planned to put into super went of living expenses.

''I have only worked 35 weeks in all that time,'' says Bouwmeester, who insists that no matter what people say about valuing the skills and experience of older workers, too few companies want to employ them.

''You are a social misfit when you reach a certain age. They do not tell you straight out that you are too old when you try to get a job, but you are treated like a second-class citizen.''

There is a maxim that says those with a job will always find a job and another that says never leave your job until you have found another one. Bouwmeester now regrets taking the voluntary redundancy and says he should have first researched the job market for older workers in his field. ''First look at what is out there [in terms of work] and do not be under any illusion that age is not a factor in getting as job. It is,'' he says.

The reality is no money for a new car and no more redundancy money. Bouwmeester's wife, at 60, is still at work and Bouwmeester, who has signed on with, is still looking for a job, having lost two years of work and income so far.

While the median balanced super fund was within 4-5 per cent of its pre-GFC highs at the end of the financial year, the grim reality facing many retirees - who lost a lot of money in the GFC and have not sufficiently recovered - is that they now have to try to find work in a market that is not always accepting of older workers.

''The average for mature age workers to be unemployed is two years,'' says Matt Higgins, founder of which has seen a 30 per cent increase of registered job seekers aged 55-75 since July.

''Many of them are still suffering from the downturn of 2008-09 ? They are finding they do not have enough to live on in retirement. Things looked fine when they stopped work, but the cost of living has increased dramatically during their early retirement years, their super has taken a battering, and some of them are suffering losses now because of this latest crisis.''

Mr Higgins estimates 67 per cent of his clients have been seeking work for 12 months to two years. Many of them will never get a job. ''They wait so long, they just give up,'' he says.

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