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In a bear market, don’t delay retirement and don’t reduce your income

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Janine Starks is a financial commentator with expertise in banking, personal finance and funds management.

OPINION: Nasty market conditions cause our savings to fall in value and make us re-visit our lifestyle choices. Should you take less income this year? Should you delay retirement? Should you stop investing? I don’t believe so.

The slowish motion sharemarket crash since the start of 2022 took another hit last week with US inflation coming in at 8.6% annually to May. Shares groaned and slid again. It’s the worst price rise in 40 years (since 1981). Americans have never experienced the Kiwi inflation pin-ball machine of the 1980s where our annual prices pinged around between 6% and 17%.

Nevertheless, those days are gone and we led the world with inflation target management in the 1990s.

* How we can protect low-income households from the rising costs of inflation
* Here’s how to inflation-proof your life
* How easy was it to hold your bottle in the 2020 market sell off?

Don’t downplay the sell-off

This is scary stuff. The markets really are taking a hammering and even respected publications like The Economist are running interviews with fund managers saying this isn’t the end of it. One I listened to claimed we are about halfway through. They could tell because retail investors were still ignorantly buying the dips, when institutional investors had given up. That’s sensible commentary, but doesn’t mean you should shut up shop and stop your small regular KiwiSaver payments.

If you want to find a reason not to invest or to sell up, some ghoul will convince you to right now.

That said, we can’t make light of things, because we have on our hands one serious downturn. The New Zealand sharemarket (NZX50) is down 15% since the beginning of 2022. But Kiwi shares are only a part of a balanced portfolio. Personally, I think I’ve got less than a fifth of my own portfolio in the New Zealand market.

  • US technology index NAXDAQ is down 28%
  • US index S&P 500 is down 19%
  • European index Eurostoxx 50 is down 17%
  • Chinese index Shanghai SE Composite is down 9.5%
  • Australian index ASX 200 is down 8%
  • Japanese index Nikkei 225 is down 5%
  • UK index FTSE 100 is down 2.5%

These numbers are from January 3 2022 to June 10 2022 (after the US inflation number came out).


Finance Minister Grant Robertson says some Government moves have kept inflation lower, even though it has hit a 31-year high.

Don’t fear the 1980s

US inflation has been transported back to the bad days of the 1980s. In January this year I read an investment note that reminded investors what data to take comfort in, if 2022 turned into a major sell off.

This is what it said: Since 1980, the S&P 500 Index has dropped at least 18%, seven times. That means that on average, about every six years investors experience something close to the definition of a bear market.

Yet over that period, someone buying and holding realised a 4220% gain. Enduring volatility turned a mere $10,000 into $432,000.

Reducing income drawdown or delay retirement?

Inflation and the prospect of a recession inflicts anxiety. The human brain panics. At times like this we hear a number of reactions and most involve people thinking they have to change their lifestyle and delay decisions.

It appears to make good common sense, but it doesn’t make much investment sense on a wider time frame.

Marion van Dijk/Stuff

Janine Starks is a financial commentator with expertise in banking, personal finance and funds management.

Have I cut back the income I take from my own portfolio?

No and I’m not going to. This year’s income might be 4% of a portfolio (everyone is different based on age, health, future asset sales and portfolio risk). There’s still 96% of the portfolio invested. Same next year; the vast majority has time to recover. The odd year will have a stellar upturn and I don’t increase my income when that happens. If you model the math’s of income drawdown again past data, big market falls are included. The income level spat out by the model allows us to continue with a financial plan. Of course, it gets reviewed, but it takes more than a year or two to breach the limit and cause income levels to be increased or decreased. If you’re under advice and that adviser has some technical nous, there’s no need for belt tightening.

Would I delay retiring if that decision was being made today?

No, personally I wouldn’t. Again, this year’s income and 2023 are a small part of the portfolio. Even if you’ve taken a hit just before retirement, you don’t need to try and earn your losses back via wages. You’ll be constantly popping back to work for the next 30 years if you take that approach. Let the markets take care of it. When gains occur it’s often unexpected and swift after a long period. The share price of many companies gets swept into blanket pessimism. Values become disconnected from the real performance or the resilience of a business. Timing your retirement day with a day your portfolio looks pretty, is a false security.

Would I delay buying a new car or renovating the kitchen?

Again, no for the same reason detailed above.

Would I invest less in KiwiSaver?

No, I’d keep things the same, even if this sell-off isn’t over. I can’t pick the bottom and it will average out. My payments wouldn’t be via KiwiSaver though (since there’s no advantage beyond the amount that gets your employer and government contribution). Retail investors have to grind-on. Small regular payments over decades is the only behaviour that makes sense long term.

– Janine Starks is the author of and can be contacted at Opinions are a personal view and general in nature. They are not a recommendation for any individual to buy or sell a financial product. Readers should always seek specific independent financial advice appropriate to their own circumstances.