Two Important Ways To Plan For Inflation In Retirement

Two Important Ways To Plan For Inflation In Retirement

By Dale Gillham, Co-Founder and Chief Investment Analyst of Wealth Within.

Unless you have been on another planet, you would be aware of the ever-growing concern amongst Australia about rising costs, especially power and other utility costs.  

No one is immune from rising costs and it does not matter whether you’re 10, 15, 20 or 30 years away from retirement, rising costs or ‘inflation’ is causing stress and panic with many Australians especially retirees.

Most are, rightly so, concerned about their nest egg, and whether or not it will stretch as far as they need it to during their golden years. When planning for your retirement you need to ask two questions:

  1. How much capital do I need to generate between now and retirement that will enable me to provide the income needed for a comfortable retirement?
  2. How do I ensure my investments not only outperform inflation, but grow at a reasonable rate in order to gain the capital required.   

Now striving towards gaining a million dollars for your retirement seems like a good target for everyone, but depending on when you retire, you need to consider how the purchasing power of 1M will diminish by 2050. So whilst for those retiring now it might be fine, having the magical big ‘M’ in 20 or 30 years may not seem quite so big.  

For instance, when there’s a comparison made between now and 30 years’ time based upon an average inflation rate of 3 per cent per annum, a car that was once $28,400 becomes $68,934 – all the while wages growth is forecast to remain steady.

The good news is, there are a couple of simple adjustments you can make now, and at the time you retire to account for inflation.

Go Green

Now is a good time to create effective habits in your spending and in how you do things. For example, start investing in self-sufficiency and get into the practice of cost-cutting. You can reduce your exposure to those inflated energy prices by installing dimmer switches, ceiling fans, and solar panels – over the course of 20-30 years of retirement, these changes will save you thousands of dollars and allow you to spend more on doing the things you love.

You may also want to spend the time to cultivate a backyard garden. Not just flavoursome herbs, but tomatoes, potatoes, carrots and other staple vegetables and fruits should be of priority. If possible, get a few chickens for daily eggs and future roast dinners. The more you can grow and tend yourself at home, the more insulated you’ll be from inflated food prices. Even more important is that it is much better for your health and in retirement looking after your health is a major cost that continually rises.

Invest, invest, invest

Get active with your investments rather than just rely on your superannuation. Quite simply your superannuation will not be enough so the earlier you start to invest the better. Let your money work as hard for you now as you did to get it. When planning and investing for retirement, choose stocks that rise over decades and outperform inflation and stay away from speculative stocks.

Investing now may mean you have slightly less cash now, but you will have far more later when you need it. This is a small price to pay for your long-term peace-of-mind.

Examples of good investments to grow your retirement nest egg are;

  • ASX listed top 50 shares such as BHP and the big four banks
  • Residential real estate

Examples of good investments to protect your nest egg from inflation in retirement are:

  • Treasury Indexed Bonds
  • Annuities


Of course without the proper education it stands to reason that you are likely to have a hard time planning and maintaining these investments over the course of twenty or thirty years. If you are thinking about trading in stocks, visit to make sure your investment capital is being invested the right way – after all, it’s your future you’re planning for.


You may also like