Keeping calm when markets move is the safest retirement strategy

It’s important to remember that short term volatility in response to political announcements and other geopolitical events is a common feature of investment markets.

Most recently, President Trump’s announcements of widespread US tariffs on imports from a range of countries on 3 April 2025 caused major global sharemarkets to fall sharply in the days after.

Then, on 10 April, President Trump announced a 90-day pause before even higher tariffs on goods imported from more than 75 countries would come into effect.

Global sharemarkets including the Australian Stock Exchange rose strongly on the news, largely erasing falls in previous days. This followed an earlier sharemarket dip in March.

During periods of market volatility like this, you may see sharp rises and falls in the performance of investments. 

Most long-term investors don’t need to be unduly concerned by short-term market fluctuations as over time, investments tend to recover and grow.

It may help to review your mix of investment types to reflect your life stage. 

Diversifying your investments across different asset types could help to reduce the volatility of both investment returns and downward movements in individual asset types over time.

For example, many investors with a longer time horizon to retirement may have higher exposure to growth investments like property and shares early in their working life but may reinvest their funds into more defensive investments like cash or fixed interest as they approach retirement. 

It can help to learn more about the time frame different investment types generally take to offer their expected return as well as the level of risk associated with them.

Putting all of your money in cash longer-term can limit your future investment growth, just as leaving it all in high-risk investments may not suit your risk profile if you need to access it in the next few years.

If you are about to retire, or newly retired,  market downturns may affect the overall value of your investment options. If you need to sell more of your investments to meet your income requirements, those assets won’t benefit from any market re-bound down the track. This is known as sequencing risk and it can limit your future retirement income. 

One way to combat sequencing risk is to use the ‘bucket strategy’, which involves keeping some of your retirement savings in ‘buckets’ designed to deliver short-term, medium-term and long-term returns.

In the short-term bucket goes the money to fund your regular retirement income payments plus any other expenses you think you may have in the next one to three years. Consider keeping it in cash, such as high-yield savings accounts or term deposits with staggered maturity dates.  

This is money to live on and perhaps an emergency fund. There should be enough to pay you what you need so you don’t need to touch your higher-growth investments in the other two buckets if they experience a short-term drop in value due to a market downturn. 

When deciding how much you will need, don’t forget to factor in any other income you will receive, such as the Age Pension if you receive it, or any work income, and set aside money to cover the rest.   

Money in your medium-term bucket should be invested in stable, income-generating investments such as high-quality bonds, fixed income investments, low-risk, dividend-paying stocks or a balanced pension investment option. This bucket is designed to help your retirement savings keep pace with inflation.

Growth assets such as shares can be held in your long-term bucket, to be accessed in 7-10 years or more.

While difficult to forecast, history shows us that markets do recover from disruptive influences – for example, from the Global Financial Crisis and the COVID-19 pandemic. 

As the chart below shows, while markets dipped in 2008 during the GFC and in 2020 during the COVID-19 pandemic, they recovered and continued to grow.

That said, no one knows exactly when markets will move, or by how much, so time in the market is generally the best strategy to grow your long-term investments, rather than trying to predict when these shifts will occur. 

For instance, in calendar year 2024, global shares returned an unexpectedly high 30.1%. 

So, even in retirement, your retirement savings are likely to experience fluctuations

If you have additional money to invest, there may be investment opportunities that arise from volatility. For example, buying into share markets when they’re down (and cheaper) could mean the value of those investments rises when markets recover over time – potentially adding more value to your retirement savings. 

But this doesn't mean you should buy anything and everything that’s on sale. For example, a company’s share price may be falling because of other factors specific to that business (for example, a management change or a legal case) that could erode its long-term potential. It’s important to consider these factors and to be confident that a company’s value will rise in the future.  

At the same time, it can still be sensible to continue budgeting and saving for a rainy day – particularly in the current environment, where regular day-to-day life may be disrupted. Maintaining a separate savings fund may also help provide some peace of mind. 

No matter the state of markets, it can also be helpful to remain engaged with your super – even in simple ways, such as regularly reading fund updates, staying up to date with market developments, or reviewing your super fund and financial plan as your personal circumstances change with age.

If market volatility continues, and you were planning to retire soon, it’s possible that you may also need to consider temporarily delaying your plans depending on your financial circumstances. 

If working is no longer possible and you qualify for the Age Pension, you may be eligible for higher Age Pension payments because of a fall in the value of your super and other assets. While super funds generally report the value of your income stream to Centrelink twice a year (in March and September), you can also re-report your asset values more frequently if they have fallen in value.    

If your income and assets are too high to qualify for the Age Pension, you may be eligible for the Commonwealth Seniors Health Card. The CSHC can provide certain benefits, such as reduced cost of medicines on the Pharmaceutical Benefits Scheme, which helps to reduce cost of living pressures for retirees.

Check your eligibility for the Age Pension and the Commonwealth Seniors Health Card. 

The CFS Investments team is working hard to make sure you have the support you need. We will continue to monitor markets, share regular market updates, and communicate closely with our network of experienced investment managers.

If you would like help with your retirement or investment strategy, book a free consultation with our guidance team.