Is Inflation Hurting Your Retirement Savings?

Planning for an early retirement, or for retirement at any age, requires careful attention to long-term goals and the baby steps that help you to get there. As we make plans for the future, we usually talk in terms of “today’s dollars.” This can be confusing when you’re making plans about your cost of living in 20 to 30 years. That’s why it’s so important to pay attention to inflation as you plan for retirement.

In 20 years’ time, your current retirement savings will be worth about half in terms of what you can purchase with that money today. Let’s look at what you can do to make sure inflation isn’t hurting your retirement savings.

 

Guide to Retirement Planning

When making calculations about how much to save for retirement, most people think about what $50,000 can buy with today’s dollars. Due to inflation, however, prices generally increase over time. If prices increase 20% over the next six years, you’ll need $60,000 to match the buying power of $50,000 today. 

An effective way to combat inflation is to invest your retirement savings in a range of investments that naturally keep up with inflation. Interest rates rarely keep pace with inflation, so savings accounts may not be a good option for retirement savings. Keeping your retirement savings in a savings account is like throwing away a percentage of your savings each month.

If savings accounts aren’t always helpful for combatting inflation, what investments can you look into?

 

Superannuation

Investing regularly in your superannuation account is one of the best ways to provide for your future living costs and keep up with inflation. 

Your employer must send superannuation guarantee (SG) contributions to your super fund each pay period, but you can also add voluntary contributions to your fund. Sacrificing a bit more of your salary to your super fund each month is one of the best ways you can beat inflation and build your retirement savings at a consistent and steady rate. 

 

 

Your superannuation money can be invested in a variety of investment choices, from stocks, ETFs and term deposits, and even property.

 

Your Retirement Savings Fund

How is your super fund doing? Some people know they have a super fund, but they don’t know much about how their money is invested or how it’s performing. Other people have several super funds because they have been employed by several different companies over the years and elected the corporate super fund.

If you’re not sure how your super fund is performing, or if you have several super funds scattered around, take some time to check up on the health of your retirement savings.

Consolidating your super funds can be beneficial in a couple of ways. First, having just one fund to monitor can help you to keep a closer eye on your savings. Second, you can save on fees if you have just one fund instead of several. These fees can add up over the years, eating into your savings. 

Make sure your retirement savings fund is diversified, and talk over your investment strategy with an Altus Adviser. If you’d like to talk over your retirement savings plan, reach out to us at Altus Financial. We can help you to combat inflation and reach your personal retirement goals.

For more detailed information on planning for an enriching retirement, download your free copy of our popular Retirement Planning eGuide below: