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What Does Inflation Mean for Your Retirement Income?

When it comes to retirement planning, you should consider inflation. But first, we must know what inflation is. Inflation refers to the increase in the costs of most items and services that are used on a daily or regular basis. As a result, future payments will be worth less than now. So, what does inflation mean for your retirement income?

If your retirement income does not keep up with inflation, you may not be able to keep purchasing the same things and maintain the same lifestyle for as long as you want. This is due to the influence of inflation and prices increasing over time.

How much do I need in retirement with inflation?

What sort of lifestyle do you want to have in retirement? This is because your current lifestyle will reveal how much you wish to spend. You can then begin to calculate how much money you'll require in retirement based on inflation after knowing this figure.

Let's suppose you want to spend £40,000 per year in retirement today. Next year, that will cost £40,800, and 5 years later it would be £44,163 owing to 2% annual inflation. So, by anticipating a certain amount as your desired standard of living, you can figure out how much investments or savings you'll require when accounting for price inflation.

How can I protect my retirement income against inflation?

Investing is one of the most effective methods to avoid price increases in retirement. This is due to the fact that if you keep a significant amount of your money in cash, interest rates on cash are generally far lower than inflation.

However, it's critical to be comfortable investing your retirement funds; this does not imply that you should invest all of your money in one thing, such as property. Diversifying your asset portfolio, for example, by putting some cash and equities together while keeping others separate may be a better alternative.

When you're working, it's usually a good idea to take advantage of any employee pension plan's benefits.

You should not be concerned about inflation, but you should be conscious of it. Before making any decisions, we recommend consulting with a financial adviser who can advise on the finest alternatives for you.

Pension and savings advice with Schofield

Inflation may be a retirement killer, but it doesn't have to be if you take the time to create a strategy for overcoming it. Reducing costs, developing a realistic retirement plan, and investing in assets can all assist to minimise the effect inflation has on long-term savings.

We can review your existing pension and savings plans and tell you about ISAs and IHT planning. We’ll check that you’re on track to meet your retirement goals and let you know if you need to take further action.

Call us now on 01423 368000 or email us at

The value of any investment with Schofield Money will be directly linked to the value of the funds chosen. These may fall as well as rise, you may get back less than the amount invested. The bases and levels of taxation, and the reliefs from taxation can change at any time. They are usually dependent on individual circumstances.

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