Your Retirement Corpus Is at Risk from Inflation. Here’s What You Need to Do

Dec 06, 2018 | 1 month ago | Read Time: 3 minutes | By iKnowledge Team

The financial comfort you so clearly envisioned for yourself is still going to fall short in the face of inflation. We share tips on how to face it.

Most seniors believe that the cost of everything post retirement is a big surprise, despite having prepared for it. While they did all the right things by starting to save early and keeping their retirement corpus untouched, their did not account for the current rate of inflation. They could have never imagined the stark difference in price they’d have to pay for everything they need.

During your retirement planning phase, you need to remember 2 primary points. First, your assets must value above inflation levels, so when the time comes, you can afford your elderly necessities. Second, with increased life expectancy you’ll need to generate enough of a corpus to last you through perhaps 20 or so years of retirement. Retirement planning involves factoring in a lot of uncertainties, but planning right could set you up quite comfortably.

Inflation impact on retirement savings

The reason why many senior citizens choose to work even after their retirement age is for the sense of security that a monthly income provides, even if they have done their retirement planning correctly. Apart from the financial impact of inflation, it does have a psychological impact once you are no longer working full-time. There’s a sense of panic that comes from not being able to adjust your savings to accommodate the rising costs.

Inflation reduces your purchasing power. When the prices of the things you need begins to rise higher than what you have saved up in your account, you begin to compromise on your purchases by limiting them. Unfortunately, your need for these goods and services cannot be sacrificed after a while. Therefore, you need to be sure you can build a sufficient   to meet your required expenses.

Inflation consumes your savings faster. Remember that you need to add a cost-of-living adjustment of your annual expenses in your retirement planning to ensure you have money to buy the same amount of goods and services you require.

Inflation impact on retirement investments

When we look at retirement investments, no variable other than inflation has as much impact on the same. Retirement planning is a matter you need to take very seriously, one that will influence how you invest and save now. So, to protect your interests, your wellness and your family, the earlier you maximize your investing power, the further ahead you are of inflation. For eg: According to StatBureau.org, inflation in the last five years has risen to 28.33%. To put it straight, if the accumulation of ROI in the last five years doesn’t cross the 30% mark, you would be affected by inflation rates.

You may wish to be more conservative with your investments as you approach retirement age. Many people do take a more conservative approach to their portfolio as they enter retirement, you may want to consider other options though. You may just end up creating challenges if you act too conservatively with your  . Slowing down your investments can result in your retirement fund growth facing hiccups and weakening your financial cushion. It’s important to ensure you build an   that can keep up with rising rates of inflation over the years.

Retirement planning consists of consulting your financial advisor regularly about ways to establish an inflation-averse investment portfolio with a future eye towards a comfortable retirement. Aegon Life’s Insta Pension plan offers payout with monthly and annual options to you as well as your spouse. The minimum entry age starts at 50 years up to 75 years.

II/Oct 2018/4522


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