A comfortable retirement is everybody’s dream, but stubborn inflation could be a nightmare. As rising costs persist, here is what you can do now to prepare for a peaceful and worry-free retirement in time to come.

Costs are rising, and so are concerns among many. These fears are not unfounded, with inflation averaging about 6 per cent in 2022, the highest in recent years. As prices continue to rise, one major worry is retirement.

How can we cope with rising inflation eating away at our savings?

Rising prices, eroding savings

From our very first allowance to our most recent pay check, we have been taught the importance of saving. Saving helps us build a reserve of funds that we can use for both necessities and luxuries, while providing us with a safety net. However, saving will not be enough to save us from the effects of inflation.

A simple way to look at how inflation affects us is this: if we could have bought 10 eggs for $10 last year, a 6 per cent inflation rate means those 10 eggs will cost $10.60 this year. This may not seem drastically different over one year. But if inflation rises by 6 per cent every year, those same ten eggs will cost $13.50 in five years’ time and $17.90 in a decade.

To put it another way, the prices of eggs would go up by 35 per cent over five years, and 79 per cent over 10 years, at a yearly inflation rate of 6 per cent.

Apply that to larger ticket items such as an air ticket, a car, or a university education for your children, and things begin to look very different especially if you are looking to build your retirement nest egg.


A little risk could make a big difference

The only way to beat inflation is to ensure that our money grows as fast, if not, faster than the rate of price increases. We can do this by investing our hard-earned savings into assets that grow over time.

According to a poll done by The Business Times, 48 per cent of Singaporeans polled still do not invest to overcome inflation. The low-risk nature of Singaporeans is further reflected in how Singaporeans only invest 8.4 per cent of their money in shares and securities.

However, with inflation showing no signs of dying down, paradigms must shift if we want to stay ahead of the curve. This also means going beyond safer investments such as fixed deposits, Singapore Saving Bonds (SSBs), T-bills and CPF which tend to yield returns lower than inflation.

More fruitful alternatives include corporate bonds, equities and Real Estate Investment Trusts (REITs), which offer the option of investing in real estate without owning the physical asset, as well as unit trusts, which buy into tradeable financial assets and are actively managed by professional fund managers.

Higher-yield investments may mean higher risk, but a small leap of faith now can potentially be a big help in the future. If risk worries you, start with saving a little more to widen your safety net – it is recommended to have an emergency fund of about six months.

Whether it’s taking the plunge to pick your first stock or putting together a multi-asset portfolio, we’ve got you covered in your investment journey.

Plan with the end in mind

With much uncertainty looming ahead, planning for retirement can be frightening. Yet, it is still necessary.

When you plan, start small. Begin with considering your future needs and financial goals, then come up with present practical plans that will help you get to where you need to be. A long-term investment plan will help allay anxieties that come with short-term market fluctuations and account for your risk tolerance too.

You can also reach out to our financial experts at Maybank here, if you are looking for curated and personalised advice.

After drafting this plan, start right away. Let the winds of compounding carry you forward in your retirement planning, even as inflation creates stormy seas.

the bottom line:

Saving for retirement with rising costs can be scary, but you can beat inflation with smart long-term investment.

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