Superannuation & Inflation – Is Your Retirement Savings Keeping Up?
Imagine this: You retire today with $500,000 in super, thinking it’s more than enough to last you through retirement. But what happens if inflation stays high for the next 20 years? Suddenly, that $500,000 buys a lot less than you expected.
Inflation is one of the biggest threats to retirement savings, yet it’s rarely talked about. Here’s why it matters and what you can do to keep your super ahead of rising prices.
How Inflation Impacts Your Super
In simple terms, inflation reduces the purchasing power of your money over time. If inflation sits at 3% per year, something that costs $1,000 today will cost over $1,800 in 20 years.
When it comes to superannuation, inflation can erode the real value of your savings in two ways:
1️⃣ Your balance may not grow fast enough – If your super fund earns 5% per year, but inflation is 3%, your real return is only 2%.
2️⃣ Your retirement costs will be higher than expected – Medical care, housing, and everyday expenses will likely cost more in the future than they do now.
What Can You Do to Protect Your Super?
✔️ Invest for Growth, Not Just Stability
Many Australians choose conservative super options as they get older, but in times of high inflation, low returns might not be enough.
A well-diversified growth portfolio can help your super keep pace with rising costs.
✔️ Reassess Your Retirement Budget
Factor in higher future living costs when planning your super withdrawals.
Consider ways to reduce expenses in retirement (downsizing, part-time work, etc.).
✔️ Make Additional Contributions
If inflation is rising, making extra contributions now can help future-proof your savings.
Strategies like salary sacrificing or using tax-effective super contributions can boost your balance.
✔️ Consider Inflation-Protected Investments
Some super funds offer investment options that are better suited for inflationary periods, such as infrastructure, commodities, and inflation-linked bonds.
Review your super investment mix to ensure it aligns with the current economic climate.
Final Thought
Inflation is unpredictable, but being proactive with your super can help ensure your retirement savings keep up with rising costs. The earlier you act, the better positioned you’ll be for financial security in retirement.
Not sure if your super is inflation-proof? Let’s find out—book a free consultation with Redwood Financial Planning today.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial, tax, or investment advice. We recommend speaking with a qualified financial adviser before making any decisions regarding your superannuation. Every individual’s financial situation is unique, and personalised advice is essential to ensure the best outcome for your specific circumstances.
