In a recent article by Old Mutual Investment Group, they stated that inflation is still investors’ biggest enemy, as it erodes their spending power.

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man”.

The reality is that many investors suffer from “inflation illusion” – they do not notice how destructive inflation can be to their investments over time. Therefore, we look at our long-term investment returns in real terms (return above inflation).

INFLATION AND YOUR RETIREMENT

If your retirement income does not at least grow in line with inflation, you will either experience a decline in your standard of living or you will run out of money.

At a 6% inflation rate, a fixed monthly retirement income of R10 000 a month today will decline in real terms to about R1 700 a month after 30 years.

See an example below of the impact of inflation on a retirement income of R10 000 over several years:

Source: Old Mutual Long-Term Perspectives 2020

It is a difficult topic to discuss, as many people would prefer to avoid thinking about an unpleasant future for themselves and their families.

Your concerns are valid. The PW Harvey & Co team has expert knowledge in order to assist our clients and to provide the complete financial package.

For assistance or any queries, please contact our team at info@pwharvey.co.za