Retirement
Why timing is everything in retirement
Older Australians who are looking to have a fruitful retirement have been advised to carefully consider timing, with a bad year early on in retirement having the potential to wreak havoc on future returns.
Why timing is everything in retirement
Older Australians who are looking to have a fruitful retirement have been advised to carefully consider timing, with a bad year early on in retirement having the potential to wreak havoc on future returns.

According to a webinar hosted by Montgomery Investments founder and chief investment officer Roger Montgomery, an investor who experiences major drawdowns early are significantly worse off than those who feel the pinch later in life.
Using the example of an investor with $2.5 million, Mr Montgomery showed the potential impacts for investors.
The impact of a poor sequence of returns has to be experienced somewhere, and in the above example, it is experienced through income (pension payment). That is, the Scenario A pension payment aggregates to $9.206 million over 30 years (or an average annual payment of $306,851) while the Reversed Scenario pension payment aggregates to $4.384 million over 30 years (or an average annual payment of $146,130). This is a difference of $4,821,451, or an average of $160,715 in annual pension payments.
To mitigate against sequencing risk early, the fund manager highlights cash strategies as well as investing which protects against downside risks.

“We believe mitigating against the risk of loss through the diligent use of cash in a portfolio, by not investing in when the market is expensive, by not investing in high-risk, high-beta companies, by avoiding those risk and investing in cash, we believe it can produce a superior outcome for retirees,” Mr Montgomery said.
Elsewhere in the webinar, Mr Montgomery shared how older Aussies who moved up the risk curve are especially exposed to the coronavirus outbreak.
Using the virus as an example, Mr Montgomery highlighted the importance of sequencing in retirement, with falling returns later in life not having the same impact as early-stage reductions.
“Sequence is essentially the order of returns you receive. What you don’t want is large losses early,” Mr Montgomery said.
Finally, the fund manager highlighted how effective cash strategies can be used to purchase value in equities when they provide themselves.
Mr Montgomery concluded: “Look at the P/E today for the ASX 200, what you’ll notice it is where it was back in 2019 and where it was in June 2018.
“The alternative of investing in bonds is far less attractive, so we are on the lookout for value in a variety of sectors.”
About the author

About the author


Retirement Planning
Majority of Australians anxious about retirement as super knowledge gaps persist, report finds
A new study by Aware Super has revealed that a significant majority of Australians aged 45 and over are feeling anxious about retirement, with nearly nine in ten respondents concerned they will run ...Read more

Retirement Planning
AMP’s MyNorth Lifetime boosts financial security and retirement income
AMP has reported that its MyNorth Lifetime retirement income solution is delivering significant financial benefits to retirees, with an average uplift of 50% in total income. Read more

Retirement Planning
Retirement living sector calls for planning reforms amid declining construction confidence
The Retirement Living Council (RLC) is urging governments to streamline planning systems to boost housing supply, following a decline in confidence in age-friendly construction activity. Read more

Retirement Planning
New laws to boost women's retirement savings through paid parental leave
The Australian Parliament has passed new legislation that will see superannuation guarantee contributions paid on the Commonwealth Government's Paid Parental Leave (PPL) scheme. Read more

Retirement Planning
Planning systems under scrutiny as Australia's ageing population grows
The Retirement Living Council (RLC) has called for governments to address planning system shortfalls in preparation for Australia's ageing population, following the release of new data from the ...Read more

Retirement Planning
Retirement Living Council calls for focus on seniors' housing as population ages
The Retirement Living Council (RLC) has urged governments across Australia to prioritise age-friendly housing solutions in response to new data revealing an ageing population. Read more

Retirement Planning
Macquarie University study reveals benefits of guaranteed income in retirement
A new study by Macquarie University's School of Psychological Sciences has found that mental health, enjoyment, and financial security are key benefits of incorporating guaranteed income and annuities ...Read more

Retirement Planning
Retirement villages offer affordable housing amid market crisis, study finds
Retirement villages are providing a significantly more affordable housing option for older Australians compared to the traditional property market, according to new data released today. Read more

Retirement Planning
Majority of Australians anxious about retirement as super knowledge gaps persist, report finds
A new study by Aware Super has revealed that a significant majority of Australians aged 45 and over are feeling anxious about retirement, with nearly nine in ten respondents concerned they will run ...Read more

Retirement Planning
AMP’s MyNorth Lifetime boosts financial security and retirement income
AMP has reported that its MyNorth Lifetime retirement income solution is delivering significant financial benefits to retirees, with an average uplift of 50% in total income. Read more

Retirement Planning
Retirement living sector calls for planning reforms amid declining construction confidence
The Retirement Living Council (RLC) is urging governments to streamline planning systems to boost housing supply, following a decline in confidence in age-friendly construction activity. Read more

Retirement Planning
New laws to boost women's retirement savings through paid parental leave
The Australian Parliament has passed new legislation that will see superannuation guarantee contributions paid on the Commonwealth Government's Paid Parental Leave (PPL) scheme. Read more

Retirement Planning
Planning systems under scrutiny as Australia's ageing population grows
The Retirement Living Council (RLC) has called for governments to address planning system shortfalls in preparation for Australia's ageing population, following the release of new data from the ...Read more

Retirement Planning
Retirement Living Council calls for focus on seniors' housing as population ages
The Retirement Living Council (RLC) has urged governments across Australia to prioritise age-friendly housing solutions in response to new data revealing an ageing population. Read more

Retirement Planning
Macquarie University study reveals benefits of guaranteed income in retirement
A new study by Macquarie University's School of Psychological Sciences has found that mental health, enjoyment, and financial security are key benefits of incorporating guaranteed income and annuities ...Read more

Retirement Planning
Retirement villages offer affordable housing amid market crisis, study finds
Retirement villages are providing a significantly more affordable housing option for older Australians compared to the traditional property market, according to new data released today. Read more