Because rising prices diminish the value of every naira saved, inflation continues to be one of the most potent factors that can affect retirement income.
Retirees who depend on fixed pensions or steady income streams may find it difficult to keep up with the rising costs of healthcare, housing, food and other necessities. It’s important to understand how inflation affects your finances because a number that looks adequate now could not be enough in ten or twenty years.
Below are seven (7) ways by which retirees can beat inflation and protect their pension.
Diversify your retirement portfolio
A well-diversified portfolio helps you generate returns that surpass inflation by including stocks, real estate, commodities, and other assets that behave differently during economic shifts. Commodities typically increase in value during inflationary times, stocks offer long-term growth potential, and real estate typically appreciates along with growing expenses.
Use treasury inflation-protected securities (TIPS)
By modifying their principle in accordance with inflation rates, TIPS protect your money by increasing the value of your investment anytime consumer prices rise. They pay interest twice a year and provide consistent, government-backed protection during inflationary years.
Choose inflation-protected annuities
Certain annuities have automatic cost-of-living adjustments that raise your payouts annually in reaction to inflation. Although the initial payment amount may be less than that of regular annuities, these annuities provide long-term stability and consistent income.
Use savings accounts and short-term cash tools
Retirees can earn significantly greater interest than typical accounts using high-yield savings accounts, short-term CDs, and treasury bills, which helps cash holdings lose value more gradually during inflation. These solutions produce modest returns while serving as safe havens for emergency finances or short-term spending plans.
Invest in your skills and health
In order to counteract the consequences of inflation, retirees who keep improving their abilities may find opportunities for part-time employment, consultancy, or freelancing income. Maintaining good physical health also lowers medical expenses, which can quickly deplete retirement funds and typically increase more quickly than overall inflation. Investing in wellness, fitness, and health can result in long-term cost savings of thousands of dollars.
Add dividend-growing stocks
Businesses that are renowned for raising their dividends annually provide retirees with an expanding income stream that keeps up with inflation. These companies frequently have steady profits, solid business plans, and reliable financial results. Retirees might avoid becoming overly dependent on fixed payments that might not increase in line with living expenses by having a growing dividend stream.
Review your portfolio regularly
Businesses that are renowned for raising their dividends annually provide retirees with an expanding income stream that keeps up with inflation. These companies frequently have steady profits, solid business plans, and reliable financial results. Retirees might avoid becoming overly dependent on fixed payments that might not increase in line with living expenses by having a growing dividend stream.
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