Retirement
COVID-19’s ‘retirement trap’
The fallout from COVID-19 is likely to hit retirees the hardest with health, lifestyle and financial implications for older Australians, an industry expert has said.

COVID-19’s ‘retirement trap’
The fallout from COVID-19 is likely to hit retirees the hardest with health, lifestyle and financial implications for older Australians, an industry expert has said.

BetaShares senior investment specialist Dr Roger Cohen believes older investors are most at risk as they try to navigate distorting perceptions, changing consumer behaviour and testing the mental fortitude of investors through volatile markets.
The investment specialist believes that in order to understand the impact of COVID-19 on retirees, it is critical to review how human behaviour is being influenced by the pandemic, and how it will be influenced after the event has passed.
“If we assume that COVID-19 will at some time be eradicated entirely, or completely controlled (including effective testing and a vaccine), we will not revert to the same state as we were in pre-COVID-19. We’ll be changed as a society in many respects,” he said.
“Some of these changes – both positive and negative – will be logical and rational, while others will be exactly the opposite.”
To highlight this, Dr Cohen explained the potential impact on the cruise ship industry, which is likely to be heavily impacted when life gets back to normal.
“Once the pandemic has passed (and future occurrences can be controlled), the risk of taking a cruise is no higher than it was before COVID-19. However, people will be much more reluctant to be on a cruise ship as their perception and awareness of risk is now raised,” Dr Cohen said.
“This means that cruises for many retirees (and others) will be replaced by local travel, travel to specific destinations, or no travel at all.”
Dr Cohen explained that this line of thinking applies to many other issues and actions, where the risk is perceived to have increased, regardless of whether it has or not.
Dr Cohen argued that pre-retirees and those in the retirement phase should stay invested despite the wild volatility triggered by the COVID-19 pandemic. However, he noted that riding out the market swings will test the mettle of even the most seasoned investors.
“This is where rational and irrational behaviours can have a significant impact on the financial wellbeing of retirees,” he said. “The decisions they make during this unprecedented event could make or break their retirement plans. It may leave some effectively ‘retirement trapped’ by their irrational decision making.”
The fund manager noted that many retirees and pre-retirees set up SMSFs as a reaction to the global financial crisis.
“Many SMSFs were not well governed or advised. Coming out of the GFC, they had large allocations to cash and therefore missed out on the recovery in equities,” he noted.
The COVID-19 pandemic has already impacted the superannuation assets of most Australians. The impact of this is exacerbated if they are in retirement and drawing down on these assets.
Dr Cohen believes many retirees, particularly those who sell out of the market irrationally, will not fully benefit from the recovery that will eventually take place, and that any changes to the construction of their portfolios as a reaction to the current situation will also have lasting consequences. These may be positive or negative.
About the author

About the author


Retirement Planning
Retirement time bomb requires complex thinking
The majority of Australia’s super assets now sit in the hands of retirees and pre-retirees, but many require more nuanced investment strategies to achieve the lifestyle they want in retirement, a ne...Read more

Retirement Planning
Why some Millennials are struggling to save for retirement
Millennials are struggling to save for retirement as they face challenges that are different from other generations. What are these reasons? ...Read more

Retirement Planning
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians. ...Read more

Retirement Planning
Effective tips that can help Millennials retire faster
Millennials have changed the cultural and societal landscapes of the world. This is unsurprising, given the fact that they are the best educated and most diverse generation in history. ...Read more

Retirement Planning
What you need to know to get ahead financially
Australians looking to get ahead are being advised to analyse their financial situation, set financial goals and reduce debt whenever possible. ...Read more

Retirement Planning
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the f...Read more

Retirement Planning
Should older Australians downsize their property?
Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up i...Read more

Retirement Planning
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans. ...Read more

Retirement Planning
Retirement time bomb requires complex thinking
The majority of Australia’s super assets now sit in the hands of retirees and pre-retirees, but many require more nuanced investment strategies to achieve the lifestyle they want in retirement, a ne...Read more

Retirement Planning
Why some Millennials are struggling to save for retirement
Millennials are struggling to save for retirement as they face challenges that are different from other generations. What are these reasons? ...Read more

Retirement Planning
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians. ...Read more

Retirement Planning
Effective tips that can help Millennials retire faster
Millennials have changed the cultural and societal landscapes of the world. This is unsurprising, given the fact that they are the best educated and most diverse generation in history. ...Read more

Retirement Planning
What you need to know to get ahead financially
Australians looking to get ahead are being advised to analyse their financial situation, set financial goals and reduce debt whenever possible. ...Read more

Retirement Planning
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the f...Read more

Retirement Planning
Should older Australians downsize their property?
Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up i...Read more

Retirement Planning
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans. ...Read more