The 2021 – 2022 inflation surge is causing havoc and tears across the world. Annual inflation in the United States is the highest it’s been since 1981, and ditto for the UK. In South Africa, annual consumer inflation has reached a 13-year high.

Eye-watering inflation headlines aside, what does this all mean for individuals saving for retirement and those on the cusp of joining the retirement club?

Still saving, retirement is 20+ years away

Even if you belong to this cohort of individuals in their working years with retirement on the distant horizon, inflation should still be top of mind when it comes to your retirement fund investments. Here your investment goal comprises the essential ingredients to a chunky nest egg: Returns that outperform inflation and your financial service provider’s fees, and money that actually grows – otherwise, you’re just saving. If the assets you’re invested in are too risk-averse, your nest egg runs the risk of losing value each year. Not a good vibe.

Retirement is around the corner

Consumers worldwide are under financial pressure. In this context, it might be prudent to consider delaying retirement for a couple of years (if possible). This will not only give your savings more time to grow, but it could also provide much-needed time to ride out the global post-pandemic inflation wave.

If you’re all set to clock out of your 9-to-5, look into purchasing a guaranteed annuity. An inflation-linked annuity will help retain the purchasing power of your savings. This might mean that you start off with less money per month going into retirement, but over the long haul, you want your income to increase annually.

Just retired

Labour statistics and international news report that inflation is currently driving many retirees back to the workplace. This is especially so for those who retired during the pandemic, now struggling to keep up with the cost of living. If this isn’t an option for you, consider tapping into your discretionary savings. If that’s not possible, perhaps explore additional sources of income. Your aim is to avoid a dramatic increase in your annuity draw-down rate.

Speaking of additional sources of income, Simon recently shared a great option that can bring in a bit of extra cash every month: A portfolio that pays monthly dividends. You can read all about it here.

In closing, there is a speck of positive news (maybe). When inflation soars, interest rates tend to follow suit; which is not necessarily bad news for retirees. Retirees generally have more conservative portfolios (more cash and other shorter-term assets), so a portion of their income might increase with higher interest rates.

Saving for retirement is the biggest investment most of us will ever make. Sadly, it can also be very complicated. In this monthly blog, Carina Jooste responds to common retirement questions, ranging from which products are best suited to different circumstances to efficient tax treatments.