War in Ukraine: Implications for your retirement

Russia’s invasion of Ukraine is first and foremost a human tragedy.  The images we’re seeing on the news are just terrible.  But if we turn our minds to the economic impact, we can see that there have been immediate consequences.  Sure, they’ve been felt most acutely on the other side of the world, particularly in Europe.  But there are economic consequences of the war in Ukraine being felt right here in Australia as well.

So, what does it mean for Australian retirees in the short-term and should we be doing anything now to protect ourselves?

Lots of uncertainty

The truth is, we don’t know what’s going to happen with the war in Ukraine. 

What we do know is that the Australian share market has been surprisingly resilient, but stocks in Europe have not fared as well.  The German stock exchange is down more than 8 per cent since the Russian invasion.

We also know that the prices of commodities in Europe have risen sharply since the war began. The price of gas in Europe has doubled and oil prices are up by more than 40%.  The price of base metals like nickel and aluminium are sharply up in Europe as well.

Yin and yang

Here in Australia, we’re also seeing the impact at the petrol bowser, with record high fuel prices.  But it’s not all bad news for the Australian economy.  Australia is a net exporter of commodities that have risen in price. That will have benefits for our budget with higher than anticipated revenue.

Looking beyond the war in Ukraine, the Australian economy has been surprisingly resilient.   In fact, in the December quarter Australian economy grew 3.4 per cent and with the cases of omicron reducing, business confidence and employment are both up. 

Having said that, with the Australian economy now firing hotter than it was pre-Covid, we can expect higher inflation and higher interest rates. With higher interest rates, there is the real possibility that housing prices will fall in the short-term.

Implications for retirees

Retirees are more conservative than their younger selves, and with so much uncertainty it can be tempting to sell growth assets to increase short-term security. But with inflation rising, growth assets are essential.

The fact is retirees are both short-term and long-term investors. They require money to live on now, but they still need to be responsible over the long-run so they don’t run out.

At Daniel Crump Financial Planning we are specialists in retirement and use a framework that is designed to manage retirees’ short and long-term risks.

If you’d like to learn more give us a call, we would love to help.

Daniel Crump is the founder of Daniel Crump Financial Planning.  This article is general and does not consider your personal circumstances.  If you would like advice specific to you, give us a call.