Are worries about inflation keeping you up at night?

A deeper look at inflation and what you can do about it

With inflation at 5.5%*, quite simply, if you’re saving for retirement your money is going to have to work harder to keep its value.

Let’s say you were planning to retire on savings of £100,000.

If prices go up by 10% before you retire, you’ll need to save an additional £10,000 to have the same retirement you had planned for.

This means you’ll either have to:

  1. save more
  2. consider investing to potentially grow your money, or
  3. delay retirement.

Of course, you could still retire with your £100,000 but there’s no getting around the fact it won’t be ‘worth’ as much in terms of what you can buy for your money.

As with any investment, your money has the chance to go down as well as up and you may not get back what you put in.

And for those already in retirement?

If you’re already in retirement the opposite applies.

Let’s say you already have a yearly income of £10,000 and prices rise by 10%.

In order to enjoy exactly the same standard of living your income will need to increase by 10%.

And while some incomes from pensions and the state pension do increase each year, many of these are unlikely to keep up with inflation.

Inflation brings another problem to those already in retirement. If you’re retired you essentially get hit twice.

Not only is the purchasing power of your money reduced but if you are generally spending more time at home than when you were working,  it’s likely to mean an increase in energy bills (and we know that energy prices are currently rising) so inflation creates two issues:

  1. your money is ‘worth less’, and
  2. you are paying more for the cost of living.

Inflation is currently 5.5%, at that rate, it would take a little over 12 years to halve the value of your money.

So how can you help combat the effects of inflation?

Investing gives your money the chance to grow which can help offset the effect of inflation.

But the term ‘investing‘ can often put people off or it may conjure up visions of high stakes and either winning big or losing everything.

However, in reality, there are many different ways to invest and many different levels of risk and reward so there are many ways your money can work harder for you.

Isn’t it at least worth considering?

If you would like to understand more about what you could do to ensure your retirement plans are on track, contact Assured Life Advisers today to find out more.

*Source ONS as of January 2022

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Inflation is reducing the buying power of our money but there are ways to protect ourselves against rising inflation. Take a look to see what this may mean to you and see what can be done about it.
Joel Wood
Assured Life Advisers
Assured Life Advisers
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