Bountiful Wealth

22 Apr 2025

Inflation: The silent retirement killer – How It impacts your savings and how to prepare

When planning for retirement, most people focus on how much they need to save. But we often forget about inflation. Over time, inflation reduces the purchasing power of your money, meaning that what seemed like a comfortable retirement fund today may not be enough in the future.

So… what IS inflation and why should you care about it?

Inflation is the general increase in the price of goods and services over time. You’ve probably noticed that things cost more than they did ten years ago – groceries, petrol, utilities, and even your morning coffee. That’s inflation at work.

While inflation is a normal part of the economy, it poses a real challenge for retirees. If your savings don’t keep pace with inflation, you could find yourself struggling to afford the same lifestyle you envisioned when you first started saving.

What impact does inflation have on your retirement savings?

Let’s put this into perspective. If you plan to retire with $1 million today, that money may seem like plenty to live comfortably. But with an average inflation rate of 3% per year, your purchasing power will be cut in half in about 24 years. That means by the time you reach your later retirement years, your savings won’t stretch as far as you originally planned.

Key areas where inflation hits hardest include:

Everyday expenses: Rising costs of food, healthcare, and utilities can quickly add up.
Healthcare costs: Medical expenses often rise faster than general inflation, making healthcare a significant financial burden in retirement.
Housing and aged care: Whether you own or rent, property costs and aged care fees tend to increase over time.

How do you to protect your retirement savings from inflation?

While you can’t stop inflation, you can take steps to ensure your savings are prepared for it.

1. Invest in growth assets

Keeping all your money in a savings account may feel safe, but over time, inflation will reduce its value. Consider investing in assets that historically outpace inflation, such as:

Shares/stocks: Over the long term, shares have delivered higher returns than inflation, making them a solid option for part of your portfolio.
Property: Real estate can provide rental income and appreciate over time, offering another way to beat inflation.
Diversified superannuation funds: Most super funds invest in a mix of assets, including stocks and property, helping your money grow over time.

2. Keep your superannuation working hard

Your superannuation is your most powerful retirement tool. Ensure your super is invested in a way that aligns with your long-term goals and risk tolerance. If you're younger, a higher-growth investment option may help you combat inflation. If you're nearing retirement, a balanced approach may be best.

If you’re unsure which option is best for you, chat to the Bountiful Wealth team – our team of experts will create a personalised plan that works for you and your situation.

3. Consider inflation-protected investments

Certain investments are designed to help protect against inflation. Options such as inflation-linked bonds adjust their payouts based on inflation, ensuring your purchasing power doesn’t erode over time.

4. Maintain a flexible retirement budget

Your retirement budget needs to be adaptable. Inflation may mean you need to adjust your spending habits over time. Be sure to review your expenses regularly and make necessary adjustments to make your money go further.

5. Plan for healthcare costs

Medical expenses often rise faster than general inflation. Consider your private health insurance as well as setting up an emergency fund that can cover any unexpected healthcare needs. These specific investment strategies can be an important step to cover future, often unexpected, medical costs.

6. Work with a financial adviser

A well-thought-out retirement plan considers inflation and adapts your investment strategies accordingly. Working with a financial adviser can help create a strategy that ensures your money keeps up with rising costs.

Don’t let inflation catch you off guard

Inflation is often called the ‘silent killer’ of retirement savings because it creeps up over time, reducing the value of your hard-earned money. But with the right strategies in place, you can ensure your retirement savings keep pace with rising costs.

By investing wisely, maximising your super, and keeping your retirement plan flexible, you can combat inflation and enjoy the comfortable retirement you’ve worked so hard for.

Need help structuring your retirement savings to deal with inflation? Get in touch with our team today, and let’s build a strategy that keeps your future secure.

The information provided is general advice only. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs.

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Inflation: The silent retirement killer – How It impacts your savings and how to prepare

So… what IS inflation and why should you care about it?

What impact does inflation have on your retirement savings?

How do you to protect your retirement savings from inflation?

Don’t let inflation catch you off guard

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