We all dream of a comfortable and secure retirement. But have you ever sat down and considered how much the money you spend on your family each month today will have increased in 20 or 30 years? If your monthly household expenses today are ₹30,000, how much money will you actually need to live a comfortable life at age 60? The most important factor in retirement planning is time. The more years you have, the more profound the impact of inflation will be, but at the same time, the more time you have for saving and investing. Let's consider the impact of inflation on your current monthly expenses of ₹30,000, considering a target retirement age of 60.

Here's the complete calculation:
Suppose you are 25 years old. This means you have a full 35 years to save and invest. This is a very long period. Even assuming an average inflation rate of 6%, today's ₹30,000 will increase to approximately ₹2.3 lakh after 30 years. Yes, to maintain your same lifestyle, you'll need approximately ₹2.3 lakh per month at age 60. If you're 30, your monthly expenses will be approximately ₹172,290 after 30 years.

Now, let's consider the example of a 40-year-old. They have 20 years to prepare. At a 6% inflation rate, their current ₹30,000 expenses will increase to approximately ₹96,000 by age 60. While the shorter time horizon reduces the overall impact of inflation, the pressure to save increases, as there are only 20 years left to build a substantial corpus.

Meanwhile, if someone starts planning seriously at age 50, retirement is only 10 years away. The impact of inflation here is the least noticeable among the three. At a 6% rate, an expense of ₹30,000 would increase to approximately ₹53,700.

A slight change of 1% can disrupt the entire game.
We often consider 6% inflation as the standard, but even a 1% or 2% increase can disrupt your entire retirement fund calculations.

Let's consider the 30-year example. At 6%, the need was ₹1.72 lakh. If inflation were to reach 7%, this need would increase to ₹2.28 lakh. And if inflation reached 8%, this figure could reach ₹3.02 lakh per month. This difference is significant and could completely derail your planning.

You can estimate your future expenses using a financial formula called the "future value" calculation. The formula is: Future expenses = Current expenses × (1 + inflation rate) ^ Years left to retirement.

Health will become the biggest burden.
One of the most common mistakes in retirement planning is to consider only everyday expenses (such as groceries, electricity, and travel). The expense that increases most rapidly with age and is unavoidable is healthcare.

Doctor's fees, regular medication costs, emergency hospitalization bills, and annual medical insurance premiums are expenses that cannot be avoided. Inflation in the healthcare sector often increases faster than the general inflation rate. Therefore, having a good health insurance cover and creating a separate fund (health corpus) for medical expenses should be a crucial and essential part of any retirement plan.

Start investing wisely
Financial experts agree that the first and golden rule of retirement planning is to "start early." The earlier you start investing, the greater the benefits of compounding. A person starting in their 30s can build a much larger corpus with a lower monthly investment than someone in their 50s.

In the early stages, when you have a longer time horizon of 20-30 years, you can take a little more risk in equity (stock market) investments, such as mid-cap or small-cap funds. These funds have the potential to deliver excellent inflation-beating returns over the long term.

But it's also important to review your investment portfolio at least once a year to see if your investments are performing in line with your expectations and goals. As you grow older and approach retirement, it is wise to gradually reduce this risk and move money into safer options (such as debt funds or fixed income) so that market fluctuations do not impact your accumulated funds.

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