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Retirement Financial Planning Amid High Inflation

Many people are concerned about the impact of inflation on their retirement savings. After all, if prices go up over time, won’t your nest egg be worth less in the future?

Most Australians are feeling the pinch due to the rising cost of living, but how does inflation affect retirement, and how can you protect your retirement assets, given that the inflation rate will likely alter throughout your golden years?

In this blog post, we discuss retirement financial planning in a world with high inflation.

Pensions and Inflation

The official inflation rate in Australia at the time of writing (October 2022) was 6.1%, but by year’s end, it is forecasted to be even higher!1

Even if wages for the working population typically increase similarly, inflation lowers everyone’s buying power. However, older people who cannot work rely on income from their assets and resources to meet their daily necessities. As a result, these assets will gradually lose value.

Suppose retirement investors decide they no longer want to deal with the share market’s volatility and other growth assets. In that case, they may choose to deploy their assets defensively in this circumstance.

The issue with doing this is that it exposes you to the threat of inflation, which means that even while your money isn’t rising, your cost of living is.

How Should I Invest for Retirement in an Environment of High Inflation?

Retirement investors should maintain a diverse portfolio with a balance of growth assets like shares and real estate and defensive assets like term deposits.

Why? Your standard of living will increase significantly, but your investments won’t, depreciating your assets and maybe having a negative long-term impact on you if inflation is running at 4%, 5%, or even more over a 20 or 30-year period.

Growth assets are essential in a market with high inflation because they will shield you from the asset depreciation that high inflation would create.

Inflation increased significantly throughout the mid-1970s and early 1980s and peaked in 1982 at approximately 11%.2

Investors could make a significant amount of money at this time, which led many to believe they didn’t need to take on any investment risk because they were making so much money.

The average return on cash was rather low, but if you go out 20 or 30 years, the average return on growth assets was much greater.

When inflationary risk was considered, those that truly achieved a greatly decreased risk held a portion of their assets in rising assets, such as shares and real estate.

How Do I Decide Which Investing Strategy Is Best For My Retirement?

To guarantee that your money can keep up with inflation and give you the income you need while saving for retirement in a market with high inflation, make sure you have the correct mix of growth and defensive assets. What is suitable for one person might not be suitable for another.

For instance, it’s crucial to consider your risk and volatility tolerance. It’s not the best choice if you have too many growth assets and lose sleep due to market movements.

Inflation may cause you to run out of money and earn insufficient returns if you have a small allocation of growth assets, which is also not ideal for you.

For more guidance, you may also consult a financial adviser specialising in retirement who can help you create a plan to ensure your investments are in line with your needs and goals, giving you peace of mind for the future.

Beat Inflation and Start Retirement Financial Planning!

It’s important to remember that when inflation is high, your retirement savings can suffer. This is why it’s important to have a diversified portfolio that can help you weather the storm. Inflation can also significantly impact your ability to retire comfortably, so it’s important to consider it when retirement financial planning in Australia. 

Coastal Advice Group reliable, comprehensive financial guidance from Sydney all the way to Byron Bay. Our mission is to empower our clients to live lives of opportunity by assisting them in making wise, well-informed financial decisions. Call us or book online to secure your first appointment to discuss your financial plan for retirement with our advisory team.


  1. https://www.rba.gov.au/speeches/2022/sp-gov-2022-09-08.html#:~:text=This%20lift%20in%20inflation%20has,be%20around%207%C2%BE%20per%20cent.
  2. https://www.rba.gov.au/publications/confs/1992/stevens.html