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Whether it’s the price of food, fuel, energy or other goods and services that we purchase, inflation is definitely increasing. The current economic climate clearly illustrates just how important it is to consider the impact of inflation on your future retirement income and take proactive steps to manage this.
Just two out of five (37%) over-55s have planned for the impact of inflation on their spending power when they stop work, according to new research!
As the consumer price inflation continues toreach historic highs, many over-55s who are either approaching retirement or have retired are facingan inflation shock as they try to manage their retirement income.
Indeed, 41% admitted they had not planned for inflation or did not know whether they had.
The other 22% say they just have not planned their retirement income at all. Interestingly, the current discussion around inflation has impacted people’s approach to retirement, with 43% of those who are working full-time planning to factor this challenge in — up from 39% of those who have already retired.
The current challenging economic situation is also encouraging a more thoughtful approach to retirement, with only |5% of the employed confessing to a lack of retirement planning compared to 23% of those who are already retired.
Among those who say they have planned for the impact of inflation on their retirement spending power, more than a third (34%) say they can rely on the State Pension keeping pace with rising prices while 33% believe their company pension will rise in line with inflation.
As well as looking to the State Pension and company pensions, the 30% of those who have prepared for inflation say they have anticipated the need for their income to rise each year and have approached their savings accordingly.
Around a quarter (26%) say they have considered how much spending they might need to cut if inflation rose sharply. The main reason for failing to take account of inflation was its unpredictability — 31% say they did nothing because they could not forecast it, while 30% say they had been caught out by the recent increase in inflation after years of stability.
The importance of future proofing your finances is clearly moving up the agenda and when you compare retirees with those over-55s who are still working, you can see that the recent inflation shock has encouraged people to plan more carefully.
No one wants to find that as they age, they need to cut back more and more just to make ends meet.
While saving as much as possible for retirement and careful planning is clearly important, it is also vital to consider all your assets and to explore different options, whether it is boosting your tax-free savings, downsizing or accessing your housing equity.
Deciding when to retire is a potentially life- changing decision and can feel like a daunting leap.
It's never too early to start thinking about how you should plan to fund your retirement and take into account the impact of rising inflation on those plans. To find out more, please contact us.
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