Your best defence against inflation
High inflation is increasing living costs. Our checklist could help secure your retirement lifestyle against its effects.
By Dan Choo - 3 min read
A little about Dan
Daniel Choo manages the diversified portfolios on behalf of Russell Investments Master Trust members and retail investors. The portfolio management team allocates between different asset classes such as shares, bonds, property and currencies.
If you’ve noticed a dollar doesn’t stretch as far as it used to, you’re not alone—and you’re not imagining it!
In the 12 months to the end of December 2023, the price of goods and services across a range of categories increased by 4.1%, according to the Australian Bureau of Statistics. That figure is the change in what’s known as the Consumer Price Index (CPI) indicator.
What is inflation and why does it matter?
The CPI measures inflation, which is the term economists use to describe the increase in the cost of goods and services over time. 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 $3.80. In 1976, you could see a movie for about $3.30—now it’s about $24 for a standard seat in a cinema.1
Weekly earnings also increase over time, so wage earners can usually afford to pay higher prices. There may be times, like over the past few years, when inflation rises more quickly than wages, but both prices and incomes usually head 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. There are several smart and simple ways you can do that. Here are some examples.
Checklist to 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 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. |
|
There are ways to keep up with inflation but if you are in financial difficulty and need support, do reach out for help. There are plenty of ways to access assistance including:
For more useful tips and hints, see our fact sheet: Taking care of your finances. |
Zest! recommends:
Work and pensions can mix
There are options and incentives for people who choose to return to the workforce after retirement.
Angelo Lombardo
1. Australian Bureau of Statistics, 29 November 2023, ‘What changes in prices and their collection tell us about Australia’
Issued by Total Risk Management Pty Ltd ABN 62 008 644 353, AFSL 238790 (TRM) as trustee of Russell Investments Master Trust ABN 89 384 753 567. Nationwide Super and Resource Super are Divisions of the Russell Investments Master Trust. The Product Disclosure Statement (‘PDS’), the Target Market Determinations and the Financial Services Guide can be obtained by phoning 1800 555 667 or by visiting russellinvestments.com.au or for Nationwide Super by phoning 1800 025 241 or visiting nationwidesuper.com.au. Any potential investor should consider the latest PDS in deciding whether to acquire, or to continue to hold, an investment in any Russell Investments product. Russell Investments Financial Solutions Pty Ltd ABN 84 010 799 041, AFSL 229850 (RIFS) is the provider of MyTracker and the financial product advice provided by GoalTracker Plus. General financial product advice is provided by RIFS or Link Advice Pty Ltd (Link Advice) ABN 36 105 811 836, AFSL 258145. Limited personal financial product advice is provided by Link Advice with the exception of GoalTracker Plus advice, which is provided by RIFS.
This communication provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. If you'd like personal advice, we can refer you to the appropriate person. This information has been compiled from sources considered to be reliable but is not guaranteed. Past performance is not a reliable indicator of future performance. To the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance on this information. This material does not constitute professional advice or opinion and is not intended to be used as the basis for making an investment decision. This work is copyright 2024. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process, nor may any other exclusive right be exercised, without the permission of Russell Investments.