Retiring during rising inflation

Senior woman checking retirement planner applicaiton on tablet computer

MOST Filipinos rely on social security for their retirement. However, despite the evidence in the past that depending on the government retirement program will surely lead us to despondent golden years. Still, from generation to generation, this is a considerable debate about whether to invest in it or just be faithful for the future.

Of course, people have yet to learn what will happen in the future. We can only look back in history to glimpse what might happen in the future. It was unforeseeable in 1974, during one of the highest inflation periods; in 1984, when political unrest was high; and in 2008, when the US Dot-com bubble burst. As a result, inflation accelerated to 6.9 percent in September, the highest in four years, bringing year-to-date inflation to 5.1 percent.

With the continuously rising prices at a record rate, people who are about to retire are worried about what kind of life they can afford with so little savings in their retirement portfolio. If these people who are still working are getting fearful, imagine what the retirees are now feeling. Unlike millennials, retirees don’t have the luxury of waiting it out. A declining market will surely leave a huge dent in anyone’s retirement portfolio. With continuous withdrawals that they must make, only a few remain to invest when the market recovers. In times like these, you must look for ways to ensure that your retirement fund will live longer than your expected lifespan.

We can never control how inflation will go about for the next few months or even years, but how you spend every peso of your retirement money is in your hand. Analyzing how you are spending on a weekly or monthly basis will help you determine the pattern of how you are managing your budget. Of course, making a list of how you spend your money is ideal, but it will be more accurate to dig at least six months back by checking your bank transaction and credit card billing. By doing this, you will see the trend in how you spend your fund, giving you a clear picture of how inflation is impacting you. You will be surprised to discover that your inflation rate may be higher or lower than someone else’s.

Finding a cheaper alternative for all your fixed expenses will significantly help. For example, consider looking for a cheaper grocery store and shopping for more affordable car and house insurance, or save fuel and drive less.

Paying off your debt if your budget allows is also a good idea. With inflation pushing interest rates higher, your debt will become more expensive, resulting in less money to spend. You may keep your mortgage payment but incurring new debt will become counterproductive.

Placing your money in a high-risk investment may be a bad idea, but there may be better ideas than holding too much cash. With rising interest rates, you may take advantage of high-bearing interest money placement. Remember, your cash is losing value at the rate of inflation. Still, diversification will work, and remember, your investment doesn’t stop growing the day you retire. You never want to be forced to have to sell your equity holding. Review your entire financial plan, and make sure your strategy and plan account for inflation.

Right now, we see how our purchasing power erodes as the price of goods and services increases, so if you are about to retire, consider delaying your retirement. Even the most well-thought-out plan can be thrown off course in a high-price environment. If you’re near retirement, you probably know you’re eligible to file for Social Security benefits at age 60. But do you know that you can increase the size of your benefits by waiting until at least full retirement age?

In the end, remember that you can only control what you can control, and wait and strategize as we go along. It is good if your current retirement plan has embedded strategies for inflation, but if not, work with a good financial planner to determine what could happen to your plan if this scenario continues to progress. The dynamic economy is continuously moving and shifting. The question now is how fast you can shift your mindset and strategies.

Christopher Cervantes is a registered financial planner of RFP Philippines. He is the author of the best-selling books Financial Planning for the Fast-changing World and The Seed Money. To learn more from Chris, attend the “Financial Planning for the Fast Changing World” webinar. Register here to reserve your slot: For inquiries, email or text at 09178104125