Retirement Planning: We often hear from our grandparents that in their time, a household could easily manage on a low salary. 20 to 30 years ago, even in big cities, a normal family could manage their expenses on an income of 5,000 to 10,000 rupees. But with changing times, inflation has completely transformed lifestyles. Today, it has become complicated to manage a whole month’s expenses on such a low income in big cities. This situation could become even more serious in the future. If a person’s monthly expenses are 50,000 rupees today, it will not be possible to maintain the same lifestyle with that amount of money 20 to 25 years from now.

Why is Retirement Planning Important?

Many people postpone planning for retirement, and those who do start planning often ignore the impact of inflation. Most people don’t consider whether the amount they are spending every month today will be sufficient 25 years from now. The truth is that expenses can increase many times over in the future, and it is necessary to prepare accordingly.

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Common Misconceptions that Harm People

It is often assumed that salaries will increase with age, and a large fund can be easily accumulated later. But in this thinking, people forget about the inflation rate. Even if inflation increases by an average of 6 percent annually, everyday expenses become significantly higher in a few years. While salaries may be higher with age, family responsibilities and health-related expenses also increase rapidly. At such times, the ability to take risks decreases, which limits investment options.

How to Estimate Future Expenses

It is essential to estimate future expenses 25 years from now based on today’s expenses. Even if home loan installments or children’s education expenses end by the time of retirement, electricity, water, groceries, and medical expenses continue throughout life. Health expenses can become the biggest burden in old age. Therefore, investing at the right time and accounting for inflation is extremely important.

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How much money will be needed after 25 years?

If your current monthly expenses are ₹50,000 and assuming an annual inflation rate of 6 percent, future expenses can be estimated using a simple formula. This involves factoring in current expenses, the inflation rate, and the time period. According to this calculation, to maintain the same lifestyle, you will need more than ₹200,000 per month after 25 years. Those who do not account for inflation in their retirement planning may face financial difficulties later. It is wise to correct investment mistakes on time.