Inflation Is the Silent Risk

The real question is not what your money is worth, but what it will buy. (The case for real, not nominal, thinking.)

Inflation is the risk that does its work in silence. Your account balance does not fall; the cost of everything else rises. A monthly income that covers your life comfortably today can fall short in twenty years, even though the number on the statement never dropped.

The arithmetic is unforgiving. At around 2.5% inflation, prices roughly double over thirty years — so the same income buys about half as much. At higher rates the erosion is faster still. This is why holding a whole retirement in cash, which feels prudent, is quietly one of the riskier choices: cash rarely keeps pace with rising prices over decades.

The defence is to own assets whose value tends to grow at least as fast as prices — shares, and inflation-linked or real assets — alongside any guaranteed income. The goal is to protect what your money buys, not just what it says on the statement.

Illustrative example: what S$100 buys later

The chart shows the buying power of S$100 after twenty-five years at different inflation rates. Even moderate inflation takes a heavy toll; faster inflation is brutal. Planning in "real" terms — after inflation — keeps the focus on the number that actually matters.