Sticky Inflation Putting Pensions at Risk

Jun 2, 2023 | Investments, Pensions, Retirement, SJB Service

Sticky Inflation Putting Pensions at Risk

Inflation is a constant risk for retirees, particularly in countries where sticky inflation is above the norm. Sticky inflation refers to a scenario where prices remain high for a prolonged period, even when the underlying factors that caused the price rise have already subsided. This is a significant concern for pensioners because their fixed incomes may not be enough to cover the increased cost of living.

Understanding Sticky Inflation

Sticky inflation is a persistent increase in the prices of goods and services that remains high even after the factors that initially caused the price hike have subsided. These factors could be anything from supply chain disruptions and natural disasters to geopolitical tensions and economic policy changes. While these events can cause a temporary increase in prices, sticky inflation is characterized by a sustained and stubborn rise in prices that is difficult to control.

One of the challenges is that it can persist even after the root causes have subsided, which makes it difficult for policymakers to control inflation rates. As a result, the impacts can be far-reaching and can affect the everyday lives of people, including pensioners who may be more vulnerable to the effects of inflation. Even if the root causes of inflation have already subsided, pensioners may continue to experience high inflation rates, which can erode the value of their savings and impact their quality of life.

Inflation

In many countries, the Consumer Price Index (CPI) is used to measure inflation. The CPI measures the change in the prices of goods and services that people buy, such as food, clothing, housing, and transportation. When the CPI goes up, it means that the cost of living is increasing, which can have a direct impact on pensioners’ income. This means that pensioners may face higher prices for the goods and services they rely on, leading to a reduction in their standard of living.

Impact on Pensioners

Pensioners, in particular, face a unique challenge because they often have a fixed income that can’t keep up with rising prices. Imagine having to live off a fixed annuity payment that never increases, while the cost of living continues to go up year after year. It’s a tough situation to be in and can make it hard to meet daily expenses while maintaining a decent standard of living.

Moreover, it’s not just pensioners who are affected. Even if you’re younger and still saving for retirement, high inflation rates can put a serious dent in your plans. The value of your savings can be eroded by inflation, making it even more difficult to accumulate enough funds for a comfortable retirement.

How SJB Global can help

It is important to monitor inflation rates and take steps to protect oneself from its impact. By investing in assets that perform well during inflationary periods and adjusting spending and investment strategies, pensioners can better protect their financial security. With the right approach, you can enjoy a comfortable retirement and protect your standard of living.

At SJB Global, we understand the importance of protecting your retirement savings. Our team of financial experts can help you create an investment strategy that accounts for the risks of inflation and helps you achieve your financial goals. We offer a range of investment solutions. Contact us today to learn more about how we can help you protect your retirement savings against sticky inflation.

This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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