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Shares chaos hits boomers

Those whose working lives are drawing to a close must be wondering how much further their living standards in retirement are going to fall given the mayhem on share markets of the past weeks.

Those whose working lives are drawing to a close must be wondering how much further their living standards in retirement are going to fall given the mayhem on share markets of the past weeks.

Three years on from the onset of the global financial crisis, older super fund members continue to pay the price for their funds' high exposures to sharemarkets.

The turmoil is not a problem for those with 10 years or more in the workforce. Markets will bounce back and shares provide better returns than other asset classes over the long term. But it's a different story for those at the end of their working lives.

The way most of the financial services industry sees it, older workers and even retirees should continue to maintain fairly high exposures to shares. With 20 or 30 years in retirement, they argue, there is plenty of time to ride out the markets' ups and downs.

But most of the baby boomers embarking on retirement or already in retirement have small account balances. Compulsory super commenced only in 1992.

These older fund members have not benefited from compulsory super for all of their working lives. They do not have enough savings to provide an adequate buffer to ride out big share market falls. It means many retirees will have to rely on the age pension in part or in full to help them make ends meet.

The majority of super fund members are in the "default" option - the option contributions go in to when no choice is made. But these are designed for the "typical" fund member not those at either end of the age spectrum, the fund members in their 20s who can afford to take on higher risk and those in their 50s who cannot afford to take on too much risk.

These so-called "balanced" options usually have about half of their money invested in shares, the highest allocation to shares among OECD countries.

Super funds have other investment options available to members and older members should at least consider whether they should switch to an option with a smaller exposure to shares and a larger exposure to lower-risk investments.

The lower-risk options go by names such as "conservative" or "stable" but there is no standardisation for such labels and members should check the asset allocations first.

Any decision to switch needs to be well considered rather than driven by fear. Super funds can now give limited advice to their members over the phone for free.

For those concerned about their super, making contact with their fund should be the first step in getting more information and becoming better informed about their options.


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