market volatility for retirees: your questions answered

It’s natural to feel uneasy when markets fluctuate, especially when you're relying on your HESTA Income Stream to support your lifestyle in retirement.

To help you better understand recent events in the Middle East and their potential impact, we sat down with HESTA Advice Manager, Alan Sher, to answer some of the most common questions we've received from our income stream members.

Summary

• Money in your income stream isn’t a set balance; your money remains invested to help it last and keep pace with inflation through retirement.
• Global market volatility can impact income streams, but markets typically stabilise once clarity emerges. 
• Diversification across global markets reduces the risks associated with concentrating your investment solely on one market or asset.
• Timing the market is generally very difficult to get right – whether you stick to your plan or adjust your options, it should be based on your circumstances, not market movements.
• If your budget allows, you can adjust your income stream payments temporarily if needed (subject to minimum rates) and increase them when your balance recovers.

How could the recent Middle East conflict impact my income stream? 

The recent increased conflict in the Middle East has led to an increase in the cost of oil and gas, which could remain high. These cost changes will likely have an impact on many industries, creating challenges as companies struggle to plan production. Investors then face greater difficulty pricing assets and predicting earnings of these companies. 

Alan explains, "This conflict has had a significant and ongoing impact on the economic environment, which is why we're seeing market volatility. The uncertainty ripples through suppliers and buyers worldwide." 

That is why our members are seeing ongoing fluctuations in their super balances as markets adjust to the above cost pressures and uncertainty. 

The encouraging news is that fluctuations like these are often temporary. Once geopolitical risks ease and companies gain clearer visibility, markets tend to stabilise.  

"Once the uncertainty settles and governments and companies understand the situation more, we'll likely see investors and markets find a pathway forward," Alan shares.

I’m worried about how much the balance in my income stream has gone down recently. Can you offer some perspective?

It’s completely understandable to feel concerned when you see your income stream balance fluctuate. Many retired members have been asking the same question — and it’s an important one.

What’s not always well known is that even after you start drawing an income stream, it continues to be invested. This is a key part of helping your money last throughout retirement.

To keep up with the rising cost of living, your super needs to grow. That’s why the Ready-Made investment options are invested in a mix of assets designed to deliver returns that outpace inflation — helping your income remain sustainable over time, whether it's 5, 10, or 20 years into retirement.

“At HESTA, we've managed market changes and volatility before,” Alan shares.

“We’ll continue using the investment principles that serve us in both good and challenging times, always focusing on the long-term and making proactive, strategic decisions.”

While some retirees may choose to reduce investment risk as they age, it’s generally important to consider keeping some growth assets. That balance can help your retirement savings stay on track to support you throughout retirement — not just at the start.

My income stream balance has gone down. Should I change my regular drawdowns?

Income streams are designed to provide steady income in retirement —and they offer flexibility to adapt when life changes.

The good news is, you can adjust your income payments if your circumstances change.

“During times of market uncertainty, some members choose to reduce their drawdowns — particularly if their balance has decreased and they are able to adjust to a lower income temporarily,” Alan says.

“Others, prefer to maintain their regular payments to ensure they can still meet their needs.”

Remember that income streams have government-set minimum drawdown rates each financial year, based on your age and your account balance as at 1 July. As long as you meet the minimum, you’re free to adjust your payments. This means you can also increase your payments above the minimum rates if this suits your needs. Market dips often recover over the long term, and you can increase your income again when your balance improves.

Is now the right time to change my investment options?

With global markets experiencing increased volatility, it’s understandable to wonder whether now is the time to change your investment strategy. Shifts in the market can be triggered by many factors.

“It’s important to remember that super is a long-term investment. Most members have spent decades growing their super and may rely on it for many years in retirement,” Alan explains.

“That’s why HESTA takes a long-term view when investing, backed by a team of experienced professionals who manage risk and seek out opportunities — even during challenging times,”

“That’s why we encourage members to stay focused on long-term goals.”

“Set your investment goals based on the level of risk you’re comfortable with — stick to that plan,” advises Alan.

If you’re unsure whether your investment option still suits your needs, speaking to a HESTA Super Specialist is a great next step.

I don't want my income stream to be invested in the US. Which investment options don't include US exposure?

It's a common question being asked by members lately. Many of us unknowingly interact with major US companies when we go online, or travel and buy goods and services for example. Furthermore, Australia's investment market is relatively small on a global scale.

“To maximise growth opportunities for our members, our investment teams strategically diversify your savings across various global markets,”

“Investing solely in Australia would mean concentrating risk and missing out on significant potential.”

Options like Australian Shares, Cash and Term Deposits are available for those wanting to minimise US investments. However, diversification across different assets and regions can provide more stable returns.

Concentrating solely on Australia could limit your exposure to global growth, as many of the world’s largest and most successful companies are based abroad.