Ways to Combat Inflation in Retirement
Inflation is one of the biggest enemies that your retirement plan is likely to face because money has a time value attached to it. As you grow older, the value of currency decreases due to increase in prices of goods and services. I’m sure you have seen the way inflation grows year after year and makes it a bit difficult to gauge how exactly it will affect you during your retirement years.
Some good news is that if you educate yourself on financial topics and commit to making wise choices throughout the years, you will be looking very good during your retirement years.
What is Inflation?
In very simple words, inflation means a general increase in the prices or goods throughout the years. What it means is that value of one dollar today may differ from the value of one dollar 20 years down the line. In other words, as and when the prices rise over a period of time, each unit of currency can buy fewer goods and services. Inflation is generally measured in percentage.
Sensible ways to Combat Inflation in Retirement
There are several ways and means by which one can fight inflation and plan for enough funds post retirement. One effective way is to purchase a house. This acts as hedging against inflation by getting a mortgage at a relatively fixed rate, thereby fixing your installments for decades to come. Although the price of your house is likely to increase, your monthly installments should remain the same for years to come.
Diversification of your funds into various kinds of investments is also a very intelligent idea. Your investments should have the right mix of debt, equity, insurance, commodity and real estate. This will lead to minimization of risk, as it is highly unlikely to lose heavily in all or most of the investment plans. It is suggested that one should invest in plans with higher returns at an early age, as they also carry comparatively higher risk. As you near the age of retirement, switching your portfolio to a more secured investments with assured returns will ensure you do not lose funds at the later stages of your life.
‘A penny saved is a penny earned’ – Having control when it comes to your expenses and switching to low cost alternatives will also help a great deal. Having said that, it does not mean that one does not take pleasure in life or do what they enjoy. Instead, it is about finding cheaper alternatives for the activities that you enjoy doing.
One should start planning from the very early stages of life to guarantee ample funds at the retirement age. If you are serious about having enough money that will combat inflation, you can always hire a financial advisor who would be more than willing to help you throughout the years. It is their job to help you be wise with your money and set yourself up well for retirement. Doing so will certainly ensure a happy and delightful life after retirement.