Zest! / AFTER WORK

Retiree strategies for combating inflation

You’ve probably noticed the price of everything rising, from grocery bills to the fuel pump—those are the effects of inflation. Fortunately, there are ways to combat inflation and protect your purchasing power in retirement.

By Joel Atputharaj - 3 min read

A little about Joel

Joel Atputharaj is the Director, Retirement Solutions at Russell Investments. A Fellow of the Institute of Actuaries, he helps members and clients navigate complex challenges and has worn many hats across the superannuation and consulting businesses. Joel currently leads a program of work aimed at making continuous improvements to Russell Investments’ offer for members approaching, at, or in retirement.

Inflation has been a hot topic in the news over the past few years. It’s the term that economists use to describe the increase in the cost of goods and services over time. You’ve probably noticed its effects.  

Of late, Australians have faced unusually high inflation, with prices rising much faster than normal. Since 2022, inflation rates in Australia—and globally—have been double or even triple the usual levels, meaning the cost of everyday goods and services has jumped significantly year after year. 

While inflation has started to ease, with prices rising by 2.4% in the 12 months to December 2024 (according to the Consumer Price Index from the Australian Bureau of Statistics), many people are still feeling the pressure. That’s because the impact is cumulative—each year of higher prices builds on the last, and even as inflation returns to more ‘normal’ levels, the overall cost of living remains higher than it was just a few years ago. 

Why does inflation matter? 

The price of virtually everything is affected by inflation. Back in 1973, you could have picked up a kilogram of potatoes for around 31 cents. Today, the same sized sack of potatoes costs closer to $5.00. In 1976, you could see a movie for about $3.30—now it’s about $25 for a standard seat in a cinema. 

Weekly earnings also increase over time, so wage earners can usually afford to pay higher prices, as long as prices and incomes are heading in the same direction. 

But things can get tricky when you stop earning an income from work—such as in retirement. 

After work, you’re spending money you’ve saved through your life, along with any government Age Pension or other income you may receive, to cover your living expenses—but don’t worry, that’s what you’ve saved and prepared for! 

The key at this point is to protect your purchasing power against rising inflation, so you can continue to afford to buy what you need and want.  

 Jered’s story: A member’s view of inflation in retirement 

Jered

We spoke to recently retired member Jered about how he’s managing his money in the face of rising prices.  

Jered has noticed that costs have risen on a range of everyday expenses including power and water bills, petrol, council rates, and groceries.  

“This has a dramatic effect, as I do not earn the same income now that I’ve retired,” he says.  

“We’ve had to change the way we do things—we’re reducing groceries, not going out, not buying as much petrol.” 

Jered, who lives in Mandurah in Western Australia, has been actively investigating what government benefits he can get to help with managing expenses. He has a Seniors Card from the Western Australian state government, which provides free and subsidised access to public transport, rebates on expenses such as water rates and driver’s licence renewal costs. It also includes 50% off fishing licences—helpful to Jered, who is a keen fisherman.  

After reaching preservation age, Jered was able to ease into retirement from his career in operations and maintenance in the power industry. 

“I took my long service leave and annual leave as a monthly payment and was employed for six months without working,” he says.  

Jered was keen to start an account-based pension from his superannuation fund, and with the assistance of our Member Solutions Consultant, Angelo Lombardo, that’s exactly what he has done. His superannuation money remains in the same types of investments it was in when he was making contributions to his fund. He transferred some of his superannuation into his wife’s superannuation account to even up the balances in their funds.  

Jered is also working through the process of applying for the government Age Pension through Centrelink, which will supplement his income when he starts to receive the payments from his account-based pension. In the meantime, he’s minimising his expenses as he enjoys his retirement gardening, fishing and spending time with his granddaughter.  

 

Checklist to help navigate inflation 

Stay invested in growth assets: Growth assets, such as shares, property and infrastructure, are generally expected to increase in value over time. This can help the value of your investment keep pace with (perhaps even get ahead of) inflation. Be aware that growth assets can experience more short-term ups and downs than defensive investments, such as fixed income and cash, but in general their value is expected to rise faster than inflation in the long run. 

Apply for the government Age Pension: The Age Pension is a useful source of income for many retired Australians. What’s more, it increases once or twice a year in line with inflation to maintain its purchasing power. Remember to apply as soon as you’re eligible. 

Claim all your entitlements : Various concessions and benefits are available to retirees that may provide extra income or help to reduce expenses. Take advantage of what’s available to you. 

Consider continuing or returning to work: This option won’t suit everyone, but paid work in some capacity can give you extra to spend. Did you know you can earn income from paid work up to a certain limit without impacting your government Age Pension entitlements? 

Make small spending adjustments: With prices rising quickly, many people have tightened their belts. Making small changes to spending habits, like switching to cheaper products at the supermarket or shopping around for a better deal on utility providers, can provide savings that allow you to maintain your lifestyle. 

 

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