Inflation measures the change in the cost of living over time. It represents an important and often underestimated risk over the long term.
Inflation is a general increase in prices over time, reducing how much your money can buy.
Inflation rates in the last 25 years
According to the Australian Bureau of Statistics, the average inflation rate over the last 25 years has been 2.5% per year. That means a dollar today is worth about half of what it was 25 years ago. If this rate continues, a loaf of bread that costs $3 today, would cost $6 in 25 years.
Over time, inflation may reduce the value of the income you receive from your investments, making it more difficult to maintain your desired standard of living.
Inflation linked income to help protect your lifestyle
If your retirement income remained the same, your lifestyle could become unaffordable. Payments from Challenger annuities can be linked to yearly inflation changes, helping you to continue to afford tomorrow what you can afford today.