Inflation is the silent killer of retirement funds - how to protect your money

As inflation seems to be easing, with resultant interest rate cuts by the US Fed and our own Reserve Bank, it's a pertinent time to talk about the impact of inflation on retirement savings.

As personal finance expert Warren Ingram remarks, while inflation might sometimes slow down, it doesn't actually leave you.

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We need to remember that inflation moves in big cycles, says the Galileo Capital director, and we need to be able to deal with these as they come and go.

"Inflation is going to go up and down a lot over your career... causing changes in your cost of living."

"A drop in inflation just means that costs don't keep increasing in the months or years ahead, but now that it's at a stage where it should ease off over time, what we want to know is: How do we protect ourselves against this biting us again in the future?."

Warren Ingram, Director - Galileo Capital

When it comes to protecting our retirement savings, there's a different mindset for people who are working and those who are already retired.

Ingram shares his pointers for keeping this money safe, and growing, for the two groups at different stages of their lives.

What you can do about inflation:

1. Working people can try to save more or earn more. They can also review the mix of their expenses but very often this might not make a big difference.
2. Retirees need to invest differently to protect themselves against inflation. Most would instinctively avoid stock markets because they don't want to risk the volatility. This is a factor, but stock markets are your biggest inflation protection as shares grow much faster than the inflation rate over time. 

Diversify your sources of growth

You should not invest all your money in the stock market. Allocating some to government bonds, property companies and cash is a good strategy. This also applies to international investments.

Avoid the big risks

Many retirees decide to start a business with their retirement money, opening coffee shops, starting a franchise or lending their children money to start their own business. It's very rare that these strategies actually pay off and can cost you a lot of money.

This also applies to the investments recommended by friends. Big returns from a private business or unregistered investment should be a warning sign of a possible scam.

Scroll up to listen to Ingram's detailed advice