Three underrated risks for your retirement scorecard

When we think about things that can impact our retirement goals, our minds often go to more familiar factors like share markets and how volatility can impact the savings we have.

But there’s more to it when mapping out what your ideal retirement looks like. Here we delve into three risks to your retirement plans that you may not have considered.

1. Outliving your savings

Most of us want to live for longer and in comfort, but it’s important to have enough funds to support those years and your lifestyle. Treasury’s 2023 Intergenerational Report found current life expectancies at birth are around 81 years for men and 85 years for women, and this is expected to rise to about 87 for men and 90 for women by 2063.

How might you manage the risk of outliving your savings?

• Know your timeframe. Considering how long you’ll live is a morbid thought, but one that can help to manage this risk. For example, a 40-year-old female is expected to live to about 85 years old according to a 2024 ABS study—and from there, you might want to round that up to at least 90 to be on the safe side. That means an investment horizon of over 50 years.
• Know your spending levels. It can be difficult to know exactly how much you might want to spend in retirement, thinking about the type of lifestyle you want could help you forecast how much you might need.
• Know your starting point. Understand where you are now to shape where you want to get to. Ask yourself questions like: what’s my current super balance? How much do I earn? Have I got any savings or debt? When do I expect to retire? What’s my current investment mix?

Our Retirement savings calculator is a useful tool for estimating your super balance at retirement in just a few minutes. Try it here.

2. Inflation

You’ve probably heard a lot about inflation in recent months—you might also know it as the consumer price index, or CPI. As a concept, inflation essentially means the change in the value of your savings over time. For example, how much would $100 buy today and in the future? Since the COVID-19 pandemic, inflation has increased. If a loaf of bread cost $3.50 in 2019, it now costs $4.50. So, $100 would’ve bought you 29 loaves of bread in 2019 and only 22 loaves today.

How then could you manage the risk of inflation?

• Invest to outpace inflation. Super funds like UniSuper set targets at CPI per year, typically 2%, 3% or 4%. This is done to stay ahead of inflation and maintain buying power over time.
• Cash may not be king in the long term. While cash may feel safe, it’s typically lower growth—so while it fluctuates less in value, it’s expected to deliver lower returns over the long term, which may mean less bread in retirement. It’s important to remember that super is a long-term investment, and even in retirement you may have many years of investing ahead.

3. Not sticking to the plan

Switching between investment options can be tempting, especially amid market uncertainty. You might be tempted to chase higher returns when markets are rising, or switch to more conservative options when the opposite happens. But the reality is that switching can impact your account balance in retirement—if you have the right investment mix, stick to your plan.

Cast your mind back to early 2020, when the COVID-19 pandemic began and markets fell sharply. This graph shows the difference between someone who stuck to their plan, someone who switched their investment options and then switched back, and someone who switched at didn’t switch back.

So how might you manage this risk of not sticking to the plan?

• Know your why. If you’re clear on your retirement goals, it can be easier to stick to the plan. Your super may be your main source of income in retirement.
• Know your risk tolerance. Select an investment mix that best supports your retirement goals and keeps your emotions in check amid volatility.
• Know the costs. Part of investment switching is knowing when to sell and when to buy, but timing these decisions consistently well is nearly impossible. It can be expensive to react emotionally to market trends.

And while it sounds simple, one way of avoiding the urge to switch your investments is to simply avoid checking your super balance.

These risks might be underrated, but they can make a difference to your future. Our super consultants can help you understand these risks with general advice¹ at no additional cost . You can book an in-person or phone appointment to get started—you don’t have to be a UniSuper member to speak with a super consultant.