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A recent report found that a growing number of retirees have made changes in their spending in response to higher inflation. 44% have significantly reduced their spending and 34% have reviewed their utility costs to try and get a better deal1.

In this article we explore:

  • What’s happening with inflation and the cost of living in Australia
  • How inflation affects your retirement income
  • Tips for managing your retirement income when the cost of living is rising fast

What can we expect for inflation in the coming year?

In 2022, Australians faced price increases for everyday goods and services unlike any we’ve seen since 1990. Generally, economists agree that higher rates of inflation - in Australia and the rest of the world - are a result of major events in recent years. Like many governments, Australia reacted to concerns that COVID would cause a recession by offering stimulus payments to individuals and businesses, creating strong demand. At the same time, supply of many goods was restricted because of lockdowns and this gap between demand and supply has been driving up prices. Then the Russia-Ukraine conflict added to this problem by limiting supplies of oil, gas, and some types of food.

In their latest figures on changes in the cost of living, the Australian Bureau of Statistics (ABS) report that inflation rose by 7.8% in the year to December 2022. This figure is called the Consumer Price Index (CPI) and it measures changes in price for a range of goods and services. In the last three months of the year, the rising cost of domestic holiday travel and accommodation (+13.3%), electricity (+8.6%) and international holiday travel and accommodation (+7.6%) were the biggest contributors to inflation2. Food costs overall are still rising, except for fruit and vegetables which were cheaper during the December quarter but still more expensive than at the start of the year.

It’s hard to know how long the rate of inflation will stay high. The Reserve Bank of Australia (RBA) has already increased the cash rate several times in the last year to encourage saving and reduce borrowing to rein in demand and inflation. They may continue to do this in 2023 to try and get annual inflation back within their target range of 2-3% on average over time3.

1 Easing the pressure: The AMP Financial Wellness Report 2022,
2 Australian Bureau of Statistics, Consumer Price Index (CPI), December Quarter 2022
3 Reserve Bank of Australia, The Inflation Target,

How inflation affects retirement income

Whether you’re earning a salary or relying on money from savings or a retirement income stream, inflation can have an impact on what you can afford to spend – both on essentials and extras. When prices go up and you have the same income, you’re likely to be making different choices about your spending as a result.

The good news is that inflation comes with a silver-lining for retirees. When interest rates go up in response to inflation, the interest rate on your savings held in interest-bearing accounts and assets like term deposits also goes up. And higher interest rates help keep your savings growing in retirement. At the same time, it’s important to consider staying invested in the market, rather than leaving your savings in cash or a term deposit. This is because investing in a range of different assets could deliver a higher rate of return over time than cash alone.

We offer a range of different investment options to generate income from your super with our retirement income accounts.

What you can do to manage your retirement income when inflation is high

1. Revisit your retirement budget

According to the 2022 AMP Financial Wellness Report, 45% of retirees follow a budget to help them stay on top of their costs and manage their retirement income4. Knowing how much you spend in retirement and where your money is going can help you feel more confident about making good spending choices. You can enjoy more peace of mind when you’ve run the numbers and know you’ve got a buffer to cover expenses and maintain your lifestyle as the cost of living rises.

If you’re not used to budgeting, our video gives you tips on working out your spending in retirement.

Watch now

2. Invest to manage inflation risk

Before you retire, your super is invested so you can maximise the savings you’ll have to live on when you’re not earning an income anymore. Once you’ve left work and exited from SASS^ you’ll need to find a way to invest your savings to keep them growing. Getting a better investment return in retirement can help your savings last and offer you the potential of more income for longer. Our research shows that about a third of retirement income from a pension account is generated through the investment returns from retirement savings.

When inflation is high, it’s even more important for retirement savings to benefit from the long-term growth that investing can provide, so that your retirement income is able to keep meeting your lifestyle goals. If you work with a financial adviser to manage your investments in retirement, it’s important to check-in with them regularly to look at your income needs and to stay on track for your plan.

Find out more about what rising inflation means for investments and retirement strategies

^ Before you exit SASS, it's important to check if you have a defined benefit pension option as a feature of your account

3. Look at ways to boost your income

If the rising cost of living has you concerned about having enough to spend throughout retirement, there are a few things to look at to supplement your income from your SASS benefit:

  • Other assets and investments – you may have other investments outside of super – such as a share portfolio or a managed fund – you can rely on for income in retirement. You may have cash savings that you want to invest. If you downsize your home, you can potentially access further funds.
  • Centrelink benefits – 60% of Australians over the age of 65 get extra income from the Age Pension5.
  • Part-time work – part-time work can be a good way to top up your income, particularly in the early stages of retirement, and help your savings last longer.

Find out more about starting a side hustle to earn some extra income in retirement.

4 Easing the pressure: The AMP Financial Wellness Report 2022,
5 Australian Institute of Health and Welfare, March 2021 – Age Pension figures

What retirement looks for you

Getting clear on what retirement looks for you and understanding how you’ll fund your vision is a great way to feel confident about retiring and look forward to this next step.

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At Aware Super, we are experts in your State Super scheme and know the ins and outs of planning for a successful retirement. 

To help you make better decisions for your retirement, book today for a no cost, obligation free appointment with an Aware Super financial planner.


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