Trump turmoil shows why super is the safer place for your savings

Aware Super

In a world where tariff wars dominate the news, financial markets flash red, and cost-of-living pressures intensify, it’s natural to feel anxious about your retirement savings. Recent share market volatility following President Trump’s imposition of large tariffs on China and other countries has sent shockwaves through the investment world, with global shares at one stage falling more than 10 per cent, before recovering most of their losses.

These tariffs are anticipated to slow economic growth, particularly in the US, and may cause prices to rise.

But here’s the reassuring news: your superannuation at Aware Super is weathering the storm better than the headlines about market falls might imply.

In fact, the Aware Super High Growth investment option, where most of our members’ funds are invested, returned a positive 0.59 per cent for the month of April, to be 8.99 per cent higher over the past year. The Retirement Income Conservative Balanced investment option, the fund where most of our retired members are invested, rose 0.71 per cent for the month.

This compares with a -0.68 per cent return for the US share market in April.

The key to the resilience of your super balance is the diversified investment strategies we use in both these options. A diversified strategy simply means investing in many different types of assets in different markets so that one type of investment doesn’t have too great an influence on overall investment performance. When share prices fall sharply, for example, other investments in a diversified strategy may be relatively stable or even gain value, limiting the overall movement in the value of your super.

In other words, when share markets fall by 10 per cent, your super likely doesn’t decline by that amount.

Diversification can be likened to turbulence dampeners on modern passenger aircraft. Some turbulence is inevitable when flying, but modern planes are designed to handle it and have devices installed which smooth out the bumps.

The dangers of short-term thinking

Market volatility can be worrying, and it can be tempting, particularly for those closer to retirement, to switch to cash to protect their savings.

However, trying to protect yourself or take advantage of short-term moves by switching rarely pays off, even for professional investors, and can profoundly damage your returns over time. Being invested in assets which benefit from economic growth – like shares – is essential to building long-term wealth. People rarely get the timing right when trying to switch between cash and growth assets. Worse still, many who switch to cash stay there.

Our modelling suggests that switching to cash at age 45 and not getting back into growth assets could lower your balance at retirement by 50%, compared with if you stayed invested in our default Lifecycle option. In retirement, your income from super could be 60% lower than if you had stayed invested.^#

Looking forward

While share markets had recovered most of their losses at the time of writing, more volatility cannot be ruled out. The reassuring news is that Aware Super is well-positioned to manage your investments through both good times and bad.

So, while news headlines around market volatility may be unsettling, remember that your retirement savings are in safe, expert hands.

# Disclaimers

• Retirement balances are rounded to the nearest $1,000 and are stated in today’s dollars, deflated using Average Weekly Ordinary Time Earnings (AWOTE) at 3.5% p.a.
• Based on a member aged 21 at the start of FY25 with $6,000 starting balance and planning to retire at age 67.
• The base scenario assumes member is invested in the Aware Super MySuper Life Cycle option until retirement, where investment returns assumed to be CPI + 4% until age 55, reducing from CPI + 4% to CPI + 2.75% between the ages 55-65 (inclusive) and CPI + 2.75% from age 65 onwards.
• The switch to cash scenario assumes member switches to Aware Super Cash option at age 45 and stays, where investment returns are assumed to be 2.5% until age 67.
• No admin fees and earnings tax are modelled as investment returns are assumed to be net of fees and tax.
• Salary is modelled by the average female member’s salary for all ages. Their employer only contributes SG at the legislated rate (growing from 11.5% in FY25 to 12% in FY26).
• Based on 2024/25 income tax rates and September 2024 aged pension rates.
• This example is for illustrative purposes only and is not intended to provide a forecast or guarantee on outcome.