Unit 4 · Level 3 · Pensions & the long game
The 40-year enemy
Crashes are loud; inflation is patient. At a modest 2.5% a year, prices roughly triple over 40 years, the span of a typical pension. A retirement 'number' that ignores this is a mirage: €500,000 in 2065 will buy nothing like €500,000 today. The long game is not only growing money but outrunning the quiet thief the whole way.
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What you get asked
At around 2.5% inflation, what happens to prices over a 40-year working life?
Rule of 72: doubling every ~29 years at 2.5%, so 40 years compounds to roughly 2.7×. Modest yearly numbers become enormous over pension timescales.
What matters for retirement is the ___ return: growth AFTER subtracting inflation.
7% growth with 2.5% inflation is roughly a 4.5% real return. Nominal numbers flatter you; real numbers feed you.
Why is an all-cash 'pension' almost guaranteed to fail over 40 years?
This is Unit 1's melting-ice problem stretched to its cruelest length. Over four decades, near-zero real return means your pot triples in digits and shrinks in groceries.
Match each defense to how it fights 40-year inflation
No single shield does it all. Growth assets carry the fight; the rest keep your measuring stick and your inputs honest.
Your pension calculator says you'll have €800,000 at 65. What's the wise follow-up question?
Always translate future euros into today's buying power; many calculators show a 'real terms' toggle for exactly this. The long game is won in real terms or not at all. 🐜
The rest of this unit
Matches, tax shelters, decades of compounding, and the enemy that never sleeps.