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How Can Your Retirement Corpus Beat Inflation?

You may think that your retirement corpus would be sufficient for meeting your retirement goals, but there’s a high chance that you may fall short if you can’t beat inflation by a good margin!

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Amit Sethi
December 13, 2023
Retirement Corpus Beat Inflation

Retirement Corpus Beat Inflation

How much money would be sufficient for your retirement? Think of any amount that may not be sufficient for meeting your retirement goals if you fail to mitigate the inflation risk. So, how do you ensure that your retirement planning beats inflation and you can live a good and happy retirement life using your accumulated corpus? Here are some critical points you must remember when planning how can Retirement Corpus Beat Inflation for your retirement.

Know How Much Risk You Can Take To Generate Maximum Return On Investment

Risk appetite falls significantly after you take retirement. It directly impacts the return on investments, and it may often lead to a negative real rate of return. When the return on investment is lower than the prevailing inflation rate, it is said to be generating a negative real rate of return.

Though it is important to minimize the risk after retirement, it is equally important to ensure that your portfolio can generate a return higher than the prevailing inflation rate. So, you must sync your investment portfolio in sync with your risk appetite in such a way that you can generate a higher return than the prevailing inflation rate. You can diversify the investment portfolio across different asset classes to lower the risk and generate a higher return at the same time.

Changing The Spending Habits In Sync With The Inflation Rate

As we talk about Retirement Corpus Beat the Inflation we need to understand Inflation first. It works continuously against your purchasing power, and if you don’t manage it within a few years, you may fail to meet your regular expenses. After retirement, you have to manage your expenses using the return earned on your accumulated corpus. On the one hand, you can try to increase the return on your investments to beat inflation, and on the other, you can also try to change your spending habits to lower expenses. For example, you can avoid unnecessary travel, check your shopping bills, etc.

Focus On A Diversified Investment Portfolio

Diversifying your investment allows you to average out the risk and, at the same time, get a higher return on your portfolio. For example, if you choose only low-risk investments, it may not be able to generate a positive real rate of return. However, if you invest in a mix of instruments with different asset classes, you can adjust the fund allocation in such a way that the portfolio matches your risk appetite and generates a higher return at the same time.

Staying invested and considering such instruments in your portfolio that can generate a higher real rate of return can easily help you beat inflation during your retirement.

The author is an independent financial journalist.

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