Prices on an upward trajectory
The broad increase in costs and prices has been especially pronounced in recent years. Prior to 2022, inflation stayed relatively muted for several years, as illustrated.
The change came in 2022, when consumer prices rose an average 6.1% from the previous year – the fastest rate of increase since 20081,2. And while headline inflation has eased to around 4.8% in 2023 and further to just 0.9% in 2025, food and services costs were relatively stable.
However, this is projected to rise in 20263. Geopolitical tensions in the Middle East and the resulting higher fuel prices, alongside adverse weather conditions in Singapore’s import sources and the impact on agricultural output have contributed to the general rise in the prices of utilities, transport, food and other essentials3. The expected high inflation for 2026 is also a global phenomenon.
Why inflation matters
Inflation matters insofar as it affects the real value or purchasing power of money. Given that food, healthcare and transport prices have increased 68%, 59% and 86% respectively over last two decades between 2005 and 2025, one could scarcely afford the same basket of goods and services at today’s prices with the same amount of money it would have cost 20 years earlier4. Put simply, if a dollar affords you less at today’s prices than it does yesterday, then the real value of the dollar has diminished.
Over time, this could have a meaningful impact on the real value of money. Consider the value of S$1,000 in 2005, invested in 1-Year SGS T-Bills that is rolled over annually. As illustrated below, while the monetary or nominal value of this initial investment grows over time, its real value declines when adjusted for inflation.
Yet inflation affects everyone differently
It is important to note that inflation impacts everyone differently. Inflation rates tend to vary for different categories of goods and services, and depending on what we consume, price increases for certain consumption categories could affect us more than others. Consequently, the exact make-up of our consumption baskets will likely determine the real impact of inflation, and this can vary considerably across households and age groups.
As an illustration, the most recent Household Expenditure Survey conducted in 2023 showed that spending on housing, food and healthcare accounted for a significant share of total expenditure among older households – those aged 65 and above – relative to their younger counterparts5. Older households also spend less on transportation and recreation & culture versus younger age groups5. The consumption of healthcare goods and services also tends to increase with age.
Accordingly, given the higher share of healthcare expenditure for older households, individuals planning for retirement should pay close attention to healthcare inflation.
Investing and staying invested
It is important to factor in the effects of long-term inflation and changing spending patterns on your retirement nest egg when designing a long-term plan. While saving regularly is a fundamental first step towards building your retirement funds, investing is also important to help manage the impact of inflation and preserve the real value of money.
Still, investing entails some degree of risk. As such, it is important to be clear-eyed and intentional in the retirement planning process, to ensure that your investments align with your objectives, risk tolerance and time horizon6.
This highlights the importance of exploring investment opportunities in various asset classes such as equities and bonds that could potentially earn a reasonable rate of return subject to our individual risk appetite.
Investing can help manage the impact of inflation, thus potentially helping us preserve or even grow the real value of our financial coffers over the longer term. This is critical for long-term goals like retirement, which for many, could be decades away. Nevertheless, it is important to assess our own risk appetite and financial goals when exploring different investment avenues6.
Conclusion
A robust retirement plan should take into account the potential effects of long-term inflation on retirement expenditures while also being cognizant that spending patterns can change significantly over the course of old age.