17th January 2024
Inflation and you retirement income
SEVERAL STRATEGIES TO LESSEN ITS IMPACT ON RETIREES
The recent surge in inflation could be a source of worry if you’re a retiree relying on your pension for income. It’s natural to question the resilience of your retirement income plan in the face of escalating prices and how this might influence your lifestyle and long-term aspirations.
Mitigating the effects of inflation is crucial for all savers and investors, but it’s even more so for retirees.
UNDERSTANDING INFLATION’S IMPACT
As a retiree, you may have a savings pool to sustain your current lifestyle and provide a financial legacy for future generations. But if climbing prices necessitate withdrawing more income than anticipated, your savings could be stretched thin. In the worst-case scenario, your savings could run out prematurely, requiring sacrifices to prevent financial depletion.
This might seem daunting, but now’s not the time for avoidance. Receiving professional financial advice and utilizing cash flow modelling will provide a transparent view of how inflation may affect your savings and cash flow. With this knowledge, we can help you evaluate whether you need to modify your financial plans.
MAINTAINING A DIVERSIFIED PORTFOLIO
The prospect of further price increases might encourage you to hoard more cash for daily expenses. While having a cash safety net for emergencies or income gaps is vital, holding excess cash may not be prudent in a high- inflation environment. Despite a rise in some deposit account interest rates, they remain significantly lower than inflation rates. Hence, leaving surplus cash in a savings account could exacerbate the struggle with rising costs.
A diversified portfolio, investing across various asset classes such as stocks and bonds, is an effective way to insulate your pension from inflation’s harm. Your allocation to each asset class should reflect your individual needs and risk tolerance, which we can assist with. We’ll also ensure your portfolio’s resilience for long-term performance, regardless of broader economic trends.
///CONTINUE READING THIS BLOG ON PAGE 23 (CLICK HERE)///
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.