The Top 8 Questions Asked About Inflation & Superannuation
As prices climb and interest rates shift, the overarching question that keeps coming up is: how does inflation affect my superannuation?
It’s a fair concern. Inflation influences everything from your grocery bill to your retirement income and understanding how it interacts with your super can make all the difference to your long-term comfort.
Here are the top eight questions we hear from clients about inflation and their super balances.
1. Does inflation reduce my super balance?
Not directly but it can reduce what your balance is worth. If inflation sits at 4% and your super grows by 4%, your balance hasn’t actually gained purchasing power. It’s just keeping pace. Over time, if inflation outpaces investment returns, the real value of your super savings declines.
2. Can inflation ever be good for my super?
In moderation, yes. Some inflation is healthy for the economy and can support long-term growth in assets like shares and property. These investments often form part of your super and can help offset inflation over time. The key is balance as too much inflation can erode returns, too little can slow growth.
3. Should I change my investment strategy because of inflation?
Not necessarily, but it’s worth reviewing. Inflation affects asset classes differently, for example:
Shares and property can provide long-term growth that outpaces inflation.
Fixed income and cash may lag if interest rates don’t keep up.
A diversified mix across growth and defensive assets is designed to manage these shifts. If your circumstances or timeframe have changed, that’s the time to revisit your investment strategy.
4. How does inflation affect my retirement income or drawdown rate?
As the cost of living rises, you may need to draw down more from your super to maintain your lifestyle. Over time, this can shorten how long your savings last. A regular review of your drawdown strategy and spending assumptions can help balance your income needs today with financial security later.
5. Should I hold more cash in my super during high inflation?
Holding some cash can be useful for short-term needs, but too much can mean missing out on growth that helps offset inflation. It’s a balancing act between stability and staying invested for the long term.
6. How can I protect my super from inflation?
You can’t avoid inflation, but you can plan for it. Try:
Keeping a diversified investment mix.
Reviewing your asset allocation annually.
Maintaining a 1–2 year cash buffer for living expenses.
Aligning your drawdown strategy with inflation-adjusted spending goals.
7. What happens if inflation falls again?
Lower inflation can ease cost-of-living pressures but may also reduce returns on certain investments. A sound financial plan is built for both outcomes as opposed to trying to time them.
8. When should I review my super strategy?
At least annually, or whenever your personal situation changes, like a career move, semi-retirement, or significant market shift. An adviser can help ensure your portfolio and drawdown strategy remain aligned with both your goals and current economic conditions.
And remember, inflation is part of every economic cycle. It doesn’t have to derail your retirement, but it does call for awareness, planning and small, steady adjustments. At UNLESS Financial, we help Australians do just this. We build retirement strategies that balance purpose, performance and peace of mind. If you’d like a clearer view of how inflation might shape your future income, we’re here to guide you through it.
