Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 270

10 years on from the GFC, retirees still jittery

The Australian share market is booming, riding one of the longest bull runs in history, but retirees are still worried about the impact of a potential downturn.

According to Chant West, super funds are reporting five-year returns of up to 10% p.a. with 10-year returns of 6%-7% p.a., well ahead of fund targets. However, some of this reflects the low starting point. Back in mid-2008, we were in the middle of the GFC, with Lehman Brothers collapsing in September of that year. The Australian market (S&P/ASX200) was already more than 25% off its all-time high set in November 2007. It then dropped another 36% as the GFC wreaked further havoc in the first half of 2009.

With the impressive market returns in the last five years or so, the damaging impact of the GFC has faded in the minds of many. There are also younger investors who didn’t experience it first-hand. One group that hasn’t forgotten are Australians retirees, who fear the impact of another financial crisis on their lifestyles. A research report recently published by National Seniors Australia (NSA) and Challenger highlights that retirees still harbour concerns over share market downturns. 72% of Australian seniors are concerned about the potential occurrence of another GFC and the impact it would have on their retirement finances.

The stability of capital and inflation-adjusted income

This concern stems, in part, from retirees’ need for income. Regular income is their highest priority and many are prepared to trade off the amount of income they get in return for stability. 78% of retirees surveyed by the NSA prefer regular and stable income over less stable, but higher, returns. Nearly 80% want an income stream that will last for life, even if there is the potential for higher income elsewhere. A market downturn that puts their income at risk is a big concern.

Retirees draw their income from their savings, but most retirees realise that they have to eat some of their cake as well. So it is the price index that matters to them, not the accumulation indices that compound over decades. The S&P/ASX200 Price Index remains well below its peak in 2007 of 6,873, so it should be no surprise that retirees are still worried.

The ‘real’ value also matters. For each retiree dollar to recover the spending power it had at the 2007 market peak, the S&P/ASX200 would need to clear 8,600. That’s another 34% rise from current levels. I haven’t seen a predictions of the ASX index at this level any time soon, but no doubt it will get there eventually. Inflation matters to retirees because wages, which most no longer enjoy, have historically tended to rise broadly in line with rising prices. This trend has not been borne out in recent times for many wage earners.

The NSA report also notes that most retirees are not tolerant to losses (i.e. diminutions of their capital, whether or not actually realised). 23% claim that they cannot tolerate any 12-month loss on their retirement savings and only 25% would tolerate a loss as large as 10% or higher. Given that super funds fell in value by twice this amount in the GFC, retirees are worried about a potential repeat. One retiree in the survey summed it up this way:

“The main issue with the GFC for me was the reduction in my capital investments of approximately $30,000. Up until that point, I would be considered a medium risk investor, however following my loss, I changed to a low risk investor and transferred much of my capital into cash. The income from the cash stream is considerably less than a shares portfolio however I was not prepared to suffer another loss of that magnitude. My attitude has not changed to this day.”

Seeking a balance between secure income and growth

When 52% retirees worry that they will outlive their savings, we see evidence of hoarding, where fearful retirees underspend just to make sure they don’t run out of money.

The solution is not obvious to the typical retiree. Most retirees need exposure to some growth in their portfolio, but they also need regular and stable income. The retirement income products widely used in the super industry don’t meet both these needs and end up concentrating more on flexibility and liquidity at the expense of risk management.

Treasury’s retirement income covenant proposal is a step in the right direction. It will make sure that super funds are offering retirement products for their members that meet the needs that NSA, and others, highlight.

Lifetime annuity sales in Australia have been growing as retirees seek to secure some of their retirement income for life in the face of reduced access to the full age pension for many. In doing so, these retirees are being advised to allocate only a portion of their portfolio to a secure income stream with the remainder available to invest in growth assets. This provides the ability to balance flexibility and security for the retiree, while giving them the opportunity to spend more of their hard-earned savings. The Treasury proposal will make this more of a mainstream strategy, something that the large majority of retirees will benefit from.

 

Jeremy Cooper is Chairman, Retirement Income, at Challenger, a sponsor of Cuffelinks. For more articles and papers from Challenger, please click here.

RELATED ARTICLES

The comprehensive income product for retirement

The ASX's 16-year drought: a rebuttal

How super funds can better help with retirement planning

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 628 with weekend update

Australian investors have been pouring money into US stocks this year, just as they start to underperform the rest of the world. Is this a sign of things to come? This looks at 50 years of data to see what happens next.

  • 11 September 2025
Exchange traded products

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement

We need a better scheme to help superannuation victims

The Compensation Scheme of Last Resort fails families hit by First Guardian and Shield losses, as well as advisers who are being wrongly blamed for the saga. It’s time for a fair, faster, universal super levy solution.

Investment strategies

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Economy

How bread vs rice moulded history

Does a country's staple crop decide elements of its destiny? The second order effects of being a wheat or rice growing country could explain big differences in culture, societal norms and economic development.

Investment strategies

Small caps are catching fire - for good reason

Small caps just crashed the party like John McClane did in the movie, Die Hard - August delivered explosive gains. With valuations at historic lows, long-term investors could be set for a sequel worth watching.

Defensive growth for an age of deglobalisation, debt and disorder

Today’s new world order appears likely to lead to a lower return, higher risk investment environment. But this asset class looks especially well placed to survive, thrive, and deliver attractive returns to investors.

Economy

Will we choose a four-day working week?

The allure of a four-day week reflects a yearning for more balance in our lives. Yet the reliability of studies touting a lift in productivity is questionable and society may not be ready for such a shift anyway.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.