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Sequencing Risk for Baby Boomers: Prosperity or Poverty

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  • Iskra Loretta

  • Smark Ciorstan

Abstract

The number of baby boomers moving into retirement is growing and yet the level of mandated superannuation available to provide sufficient retirement funding for this group is relatively low. This unique group is more sensitive to negative cyclical events and to the impact of sequencing risk through their superannuation as part of their move to retirement. Within the context of Australian superannuation, Industry superannuation accounts represent 17 per cent of the over two trillion dollar superannuation asset base, with the majority of these fund members automatically investing in high-risk “default investment strategies” as part of their MySuper contribution arrangement. This paper investigates the implications of sequencing risk for baby boomers, as typical members in these funds, how financial market volatility directly impacts on retirement outcomes and shows that investment results are sensitive in the retirement-drawdown phase.

Suggested Citation

  • Iskra Loretta & Smark Ciorstan, 2017. "Sequencing Risk for Baby Boomers: Prosperity or Poverty," Financial Planning Research Journal, Sciendo, vol. 3(1), pages 48-57.
    • Handle: RePEc:vrs:finprj:v:3:y:2017:i:1:p:48-57:n:1003
    DOI: 10.2478/fprj-2017-0003
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    1. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
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