Retirees are right to be concerned about the economic impact of the lockdown in Greater Sydney.  But that doesn’t necessarily mean we’ll see a repeat of the devastating market freefalls of March 2020.

Things have been going well

The Australian economy has bounced back earlier and stronger than expected. Economic output is now above the pre-pandemic levels and more Australians have a job than they did before the pandemic.

Australians are feeling confident and there has been unprecedented demand for property and share investments. This has pushed prices up to record highs.

Delta will slow us down

But recent events are concerning.  Greater Sydney has been placed in lockdown in order to contain the recent outbreak of infections.

That’s a good thing.  History has shown that Australians can contain Covid outbreaks and, that when we do, the economy recovers quickly.

But we will pay a price.  Economists estimate that each week of lockdown will cost the economy $1 billion.  We think that may be understated. 

With annual output of almost $450 billion the Greater Sydney economy represents about a quarter of total Australian economic output. 

Retirees are right to be concerned

With the Australian share market at record highs, it’s wise for retirees to be cautious. There is a strong possibility that elements of the market are overheated, and overpriced.

If we see a repeat of the share market freefalls of March 2020, it could be financially devastating for retirees.

But this time it’s different.  The vaccine provides the certainty the market craves.  More than 7 million Australians have now received their first dose of Covid vaccine.  This means we are about four months away from reaching herd immunity.  And when we achieve that we don’t expect there will be any requirement for further lockdowns.

A framework for peace of mind

Even if markets do fall, there are ways for retirees to protect themselves. By setting aside enough money to meet two or three years of living expenses, investors are free to invest the rest with confidence. From time to time that short-term money needs to be replenished. And if you revisit your strategy from time to time, it is possible to avoid selling down assets at depressed prices, and instead lock in profits.

At When Financial Solutions, we apply this framework to help provide protection from market falls.

So, if you partner with us, it’s not a matter of ‘if’ you will enjoy confidence in retirement, but ‘when’.

Michael Bowman and James McMaster are co-founders of When Financial Solutions.  This article is general and does not consider your personal circumstances so it may not be appropriate to you.  If you would like advice specific to you, please give us a call.