You are a fully qualified financial planner with 10 years' experience.

Jane is concerned about the financial wellbeing of her parents, Jill and Marcus Kurmond. They are both 62 years old and have recently had a discussion with Jane about their possible retirement aspirations.

They have never used a financial planner before and Jane suggested they get some advice from you so that they may put some strategies in place enabling them to achieve their retirement goals. With their consent, she has collected the following information for you ahead of a meeting they have scheduled with you:

Marcus is a construction worker and project manager, and his income before tax is $150,000 per annum. Jill works as an administrative assistant and earns $50,000 p.a. before tax.

Marcus has a superannuation balance of $350,000 invested in a high growth fund. Jill's superannuation balance is $120,000 and is currently invested in a growth fund.

They recently sold the family home, purchased 20 years ago for $1,200,000 and are looking to downsize (i.e. purchase another smaller home). They are currently living at Jill's sisters' home, who is away for 12 months. They are not paying any rent.

They would like to retire in four years' time and will need $60,000 p.a. for living costs.

They have no debt and have $150,000 cash in the bank.

The proceeds of the family home are reserved for the purchase of their new, smaller property, with any funds left over intended to be kept as an emergency reserve for house repairs and renovations as required.

Define 'sequencing risk' in relation to retirement planning and describe how market conditions over the accumulation phase of saving for retirement can affect retirement outcomes. How might this risk affect the retirement goals of Marcus and Jill? Include in your answer the following: (20 marks)

definition of sequencing risk, with two examples provided

four (4) ways to mitigate against sequencing risk

brief analysis of Marcus and Jill's financial situation

implications of market forces on Marcus and Jill's desired retirement age and funding requirements. The response should take into account the impact of COVID-19 on financial markets during 2020.

The following resources are provided to assist in your response to this question:

Basu AK, Doran, BM & Drew, ME 2013, 'Sequencing risk: the worst returns in their worst order ', JASSA The Finsia Journal of Applied Finance, no. 4, pp. 7-13, viewed 13 November 2020, ProQuest database available in the Kaplan Library.

Productivity Commission 2016, 'Submission 26 Drew Walk and Co', Superannuation competitiveness and efficiency, Australian Government, 18 April, viewed 13 November 2020, .