You have older parents who have been saving for retirement for decades. They are now getting close to retirement age and are looking at their options. One would like to leave everything in the pension fund and draw out a fixed, unchangeable amount over their retirement time. Your other parent wants to take out a chunk of retirement funds and purchase a business and use the profit from it to generate funds on which to live. You have noticed that inflation over the last year is on a rapid rise. What would you advise your parents to do based on what you know of inflation and its redistribution of purchasing power

Based on my knowledge of inflation and its redistribution of purchasing power, I would advise my older parents to embark on Plan B by purchasing a business.

How does inflation redistribute purchasing power?

Inflation redistributes purchasing power by giving less value to lenders and savers than to borrowers and investors.

The purchasing power of a fixed money plan decreases. On the other hand, the purchasing power from variable investment changes with inflation.

A business would also increase its value over time more than a fixed investment.

Thus, based on my knowledge of inflation and its redistribution of purchasing power, I would advise my older parents to embark on Plan B by purchasing a business.

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