For the 7th consecutive month in the UK, the rate of inflation remains above 10%, and as such, it is no wonder why people are becoming more concerned about the impact that it will have on their long-term finances.

However, with the help of a financial adviser, there are ways that you can tackle the knock-on effect of inflation, and make sure that your retirement plans remain achievable. 

Understanding inflation and how it can affect your retirement

Before you take steps to recover from the impact inflation can have on your retirement finances, it’s important to first of all understand what inflation is and why it can, and is, affecting your retirement income, even for those of us with several years left before we retire. 

Inflation is a term used when referring to the general increase in prices and fall in the value of money over time, and the UK currently has one of the highest levels of it than in many other Western countries. 

It clearly impacts our daily lives in terms of the ‘cost-of-living’ crisis, and as such, is affecting how much income we have free each month to contribute into pension pots or other investments.

This is in turn likely to be mirrored in more money being needed at retirement.

You’ll never truly be able to know the full impact that inflation will have on your long-term finances, but you can prepare yourself in the best way possible by seeking the guidance of a financial adviser. 

With them, you’ll be able to break down your retirement goals and, using your current finances, be able to project the value of your pension at retirement and how long that money will last, based on your retirement income needs.

What do I do if I’m falling short at retirement?

If after talking to a financial adviser it appears that your current/projected pension savings may no longer be enough to fund your retirement due to the impact of inflation, don’t panic! You still have time to get your plans on track.

Instead of reducing your monthly pension payments due to a tighter household budget, try where you can to maintain your payments at the same value, if not at a slightly higher amount than what you’re paying now, if it’s in your means to do so.

It’s important to continue these payments if you can, otherwise, you’re available retirement income will likely become smaller.

However, as with all financial decisions, it’s important that you thoroughly consider all options available to you and make sure that increasing or decreasing your payments is what’s necessary and works for you. 

If you’re ever in doubt, contact a financial adviser who’ll be able to help.

Is it worth delaying my retirement?

Another way to recover from the impact of inflation could be to take a ‘phased’ or delayed retirement to allow yourself a longer time to grow your pension while also generating an income.

Depending on your individual circumstances, this might be an easy decision to make, however, it may also not be possible for some.

There is no one-shoe-fits-all approach to retirement, and what works for someone else might not work for you, so make sure you consider this thoroughly before deciding if this is what you wish to do. 

Always discuss your retirement options with a financial adviser before making any big decisions as they will consider your financial circumstances and retirement aims to suggest the next best steps for you to take. 

Should I access some of my pension funds early?

When it comes to your retirement finances, one of the main objectives is to make sure your money will be able to fund your retirement so that you can live comfortably, and taking funds out prematurely can mean that you’ll be limiting the amount of funds you have access to during your later years.

Before withdrawing money, you should consider if this would be the right move for you, and if you can afford to do so. 

Talking to a financial adviser can help ensure you make the best and most informed decisions about your money, especially in the aftermath of rising inflation.

Will there be other income sources at retirement if my personal pension isn’t enough?

Yes! Personal pensions aren’t the only way you can derive an income at retirement and some other methods include:

• State Pensions (State Pensions are provided by the Government and provide a guaranteed income based on your national insurance contributions)
• ISAs (ISAs are a type of savings account which you can withdraw money from whenever you’d like, tax-free)
• Investments in the form of property, shares, and bonds

Always seek the guidance of a financial adviser to discuss the options available to you in relation to your financial aims and circumstances. 

Final Thoughts

Inflation is taking its toll on the UK Economy as well as on our personal finances, and in turn, could be making many of us fall short at retirement.

However, with the help of a financial adviser, you’ll be able to understand the impact that inflation may be having on your finances further down the line and learn how to implement steps now that will help you combat it. 

As with any money concerns or queries, seeking financial advice can help you to make the best and most informed decisions about your money and long-term finances.

Coffey Brooks are a team of Independent Financial and Mortgage Advisers based in Clacton-On-Sea, Essex and are directly authorised and regulated by the Financial Conduct Authority.

Disclaimer – This article and the information it contains has been written to the best of our knowledge and is not intended to be a guide to follow or a recommendation to pursue certain strategies. Please seek financial advice from a qualified financial adviser before making any decisions about your money.

The value of investments can both rise and fall and you may not get back all the money you originally invested.