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Tips to Protect Your Retirement Savings from the Inflation

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Inflation is the little monster trying to eat away at the value of your savings. In the short term, people tend to not think of it as much more than a slight inconvenience. We may have to pay a few extra rupees here and there at the market, a slightly higher bill for fuel or electricity. But over time, the impact of inflation becomes more and more apparent. You look back and you see how it has devoured the purchasing power of your money with each passing year. 

Those who are saving for their retirement face this beast head-on. If you are wondering how you can protect retirement savings from inflation, you’ve come to the right place! In this blog, we’ll take a look at the strategies to help you safeguard your nest egg against inflation so that you can enjoy a financially secure and peaceful retirement.

How does inflation impact retirement savings?

When the prices of goods and services slowly increase over time, we call it inflation or mehangai. It’s the reason why our parents used to buy chocolate for Rs. 5 but today, the same chocolate costs us several times more. 

Let’s understand the impact of inflation on retirement savings with the help of a simple example. A Rs. 5,000 expense today will be worth Rs. 5,300 at a 6% rate of inflation. If this average rate of inflation holds over the next 30 years, the same item that costs Rs. 5,000 today will cost approximately Rs. 28,700 in the future. That’s pretty big, right? Now imagine the scale when you’re saving for your retirement. What may seem like a comfortable savings amount today may not be enough in the next 20 to 30 years due to inflation. That’s why having robust retirement planning is important, as it allows you to invest in instruments that not only beat inflation but also help you grow your money.

How to protect your retirement savings from inflation?

Here are some tips to protect your retirement savings from inflation:

Diversify Your Investment Portfolio:

There are various financial products available in the market which cater to different financial goals and risk tolerances. When it comes to protecting your retirement savings from inflation, it’s important to explore options that provide a hedge against rising prices while also offering growth potential. One should also consider investing in a mix of assets such as stocks, bonds, mutual funds, and real estate to diversify and minimise market risk. You also need to consider your risk tolerance when allocating resources between equity and debt investments. 

For example, investors in their 20s or mid-30s can take on a higher level of risk compared to older investors. This is because they have a longer investment horizon which allows them more time to recover from any losses in the short term and benefit from the long-term growth potential of riskier equity assets. The higher return potential of equity products makes them an attractive option for younger investors looking to maximise their wealth accumulation over time. Starting a SIP in an equity mutual fund offers many benefits such as rupee cost averaging, compounding returns, diversification, and much higher returns compared to other financial products.

On the other hand, take bank fixed deposits for example. Because they offer guaranteed returns, they are more suitable for conservative investors. But the returns they offer are much lower and taking into account inflation and taxes, the real rate of return becomes even lower. This doesn’t mean fixed deposits are bad, they are a good option for individuals who have already retired and are looking to preserve the value of their capital. During the accumulation stage, however, there are much more effective options available such as mutual funds, especially equity mutual funds. 

Invest in Inflation-Protected Securities:

Another option for more conservative investors is inflation-indexed bonds. Inflation-indexed bonds can offer you a reliable way to safeguard your investments from the effects of inflation while providing a modest return. How do they work? Well, the principal you invest and the interest payment you receive are both adjusted to maintain the real value of your investment. 

This means that as inflation rises, the principal value of the bond increases, and so does the interest payment. This is done using the Consumer Price Index (CPI), which serves as a benchmark for inflation. Investors then receive interest payments and the repayment of principal that is adjusted to the purchasing power of their investment due to inflation. 

Focus on Income-Generating Assets:

During your retirement, you will need a reliable source of income to support your lifestyle and cover day-to-day expenses. Investing in assets that generate regular income can provide the financial stability you need during this stage of life. This includes assets such as dividend-paying stocks, properties that generate rent, or annuities. 

  • Dividend-paying Stocks: When you buy a company’s stocks, your aim is capital appreciation. Dividend paying stocks give you an additional benefit besides price appreciation – they offer regular income in the form of dividends. These may be payable on a monthly, quarterly, or annual basis. 
  • Rental Properties: Generating rental income is one of the most popular ways retirees earn a steady income. One may invest in a second house or apartment and rent it out to tenants which will reliably generate a monthly income.
  • Annuity: Annuities are offered by insurance companies and are especially designed to provide a steady stream of income for individuals during retirement. When you invest in an annuity, the insurance company agrees to make regular payments to you. The investment period is called the accumulation period. After a certain time, you start receiving the payments. Such annuities are called deferred annuities. In some policies, there isn’t any deferment and payments start immediately. These are known as an immediate annuity.

Retirees can look to invest in popular schemes such as the Senior Citizen Saving Scheme (SCSS), where they can park their savings and earn a fixed rate of interest. The government decides the interest rates for SCSS every quarter, and the interest is also paid on a quarterly basis. Other popular government schemes for post-retirement income generation include Pradhan Mantri Vaya Vandana Yojana (PMVVY) and Post Office Monthly Income Scheme (POMIS).

Also Read: Best Retirement Plans in India 2024 

Review and Adjust Your Portfolio Regularly:

Saving for your retirement is a marathon, not a sprint. There are a lot of twists and turns in this journey, such as changes in the national and global economy, fluctuations in the stock market, your changing financial situation, and evolving financial goals. It becomes important to not lose focus and stray off track. Regularly monitoring and reviewing your portfolio makes sure you stay the course. It allows you to remain on track towards building your retirement corpus. 

Every six months or year, you should review your investment portfolio and make sure it remains aligned with your financial goals, risk tolerance, and market conditions. If you feel there is an underperformance, you should immediately make adjustments and set the course straight. Remember that inflation is also not a static factor. It demands you stay proactive and adjust your investment strategy accordingly.

If you are uncertain and feel that your investments are not performing as you expected, don’t hesitate to seek help from a financial advisor. A financial advisor can review your portfolio and suggest changes in your investment strategy that align with your financial circumstances, goals, and risk tolerance.

Consider Investing in Gold and Commodities:

You can also consider investing in gold and other commodities. Gold has historically been one of the most popular investment avenues in India, not only due to the cultural significance it holds but also because of its liquidity, accessibility, and ability to act as a shield against inflation and other economic uncertainties. It is generally a stable investment. Besides physical gold, one can also explore investing in digital gold

The popularity of assets such as gold exchange-traded funds (ETFs) and gold mutual funds is on the rise. They give you the convenience of electronic trading and portfolio diversification without the need for physical storage. They also offer peace of mind over their physical counterparts as you won’t have to worry about theft or wear and tear either. Sovereign Gold Bonds (SGB) issued by the Reserve Bank of India are another attractive option for investors. 

While gold has its benefits as a hedge against inflation, one should limit the exposure to gold to around 5-10%. It is great for portfolio diversification, but other asset classes offer better long-term returns and growth potential, which is what’s important for building a retirement corpus.


Everyone wants a peaceful life in their twilight years, but planning for that peace is very important. Nobody wishes to fall into a cycle of debt or become a burden to their children. Hence, investing and preparing for life after retirement should start as early as possible. Figuring out how much you need to save for retirement is also a bit tricky. You must consider factors like desired lifestyle, location, rising inflation, increasing medical costs, and longer life expectancy. Analysing these aspects will give you clarity on how much you need to invest.

There are many ways to safeguard your savings from the impact of inflation. These include diversifying your portfolio, investing in inflation-protected securities, focusing on income-generating assets, regularly reviewing and adjusting your investments, and considering alternative assets like gold. If you have a long investment horizon, starting an equity mutual fund SIP is a great way to shield your money from inflation and grow it substantially. Inflation might seem scary, but if you plan for it, you can do more than handle it, you can prosper and thrive!

Also Read: Impact of Inflation on Investment Planning: Strategies to Beat It