The arrival of Covid in New Zealand introduced us to lots of things that were a bit unfamiliar: Isolation periods, masks, bubbles, testing… and inflation.

When the supply chain constraints of the pandemic period collided with increased demand from New Zealanders who could not travel, and geopolitical tensions, New Zealand prices for goods and services accelerated at a level not seen in three decades.

That was tough for many households, including those who were working hard on planning their finances for retirement, or who had already shifted on to a fixed income.

Although that price pressure is now cooling, it has been predicted that inflation will settle at a level higher than before the pandemic.

Here’s what that might mean for your retirement strategy.

What’s going on?

The rate of inflation is steadily declining from its pandemic peaks, and the Reserve Bank said in April that it expected it to settle within its 1% to 3% target band by the end of 2024.

But economists do not expect it to be as low as it was pre-2020, and we have seen in dramatic fashion how quickly prices can pick up.

If climate change is likely to mean more weather disruption in future, it’s not impossible that we could see more food price spikes.

Why does it matter?

The big problem for many retirees has been trying to make sure that their investments kept up in the inflationary environment.

Although interest rates have risen sharply, when inflation hit a peak of more than 7% in 2022, many investments were not offering a return at that level.

Term deposit rates were lagging and share market returns were also volatile.

That has meant that many people have seen the value of cash investments in particular eroded, in real terms, while they struggled with the rising cost of living.

Diversification helps

This period has shown many investors the importance of diversification.

Having a mix of asset wealth and cash wealth can provide a level of security to help weather financial storms.

While cash may have suffered, some asset classes – such as commodities –  performed well through the period, and others are expected to start recovering with more conviction once interest rates soften again.

Strategy matters

A solid retirement strategy can help you achieve financial security, whatever the economy is doing.

There are ways that it is possible to potentially lessen the impact of an unexpected shock, whether that’s a pandemic or simply a local economic blip.

Being agile can help to keep your strategy in line with the wider economic environment.

We can work with you to determine what is most important in your retirement planning and devise an appropriate plan to help make that happen and keep you on track.

Monitor and review

What suits you now might not always be the right solution.

As time goes on and the macroeconomic environment changes, you may find it useful to regularly review your investments to ensure that they continue to align with your goals and expectations.

It can also help to have a budget in mind to guide your decumulation and give you peace-of-mind that you are still on track, even if unexpected hurdles arise.

The NZ Society of Actuaries offer some drawdown “rules of thumb” to help make money last through retirement.

Get your plan sorted

Is it time to check in on your retirement strategy? Our SHARE advisers can offer professional guidance to help you ensure you’re on the right track, whether you’re currently still preparing for retirement, or you’re already managing your way through your post-work life.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.