Many people make mistakes when planning for retirement, especially when it comes to underestimating the impact of inflation. The amount you save today may seem sufficient, but over time, inflation silently erodes your purchasing power. Without a proper plan, the lifestyle you enjoy now may become unaffordable in your later years.
In this article, we look at the case of a 30-year-old man earning ₹1 lakh a month today, who wants to maintain the same lifestyle after retiring at 60. Will the amount he spends today be enough three decades later? And how can he prepare for the shortfall? Let’s find out.
With inflation currently averaging 6%—a trend consistent over the past two decades—the same ₹1 lakh required for monthly expenses today will amount to ₹5.75 lakh per month after 30 years. This means a person would need nearly six times more money to maintain the same standard of living at retirement.
Today, our case study subject spends ₹1 lakh on rent, groceries, travel, weekend outings, and other household needs. He is childless now, but future expenses like childcare, school fees, and higher medical bills will add to the burden. Every expense will inevitably increase with inflation.
During his working years, an annual salary hike of 10–12% can help him meet rising costs. However, post-retirement there will be no salary income, and expenses will continue to grow. Without preparation, the gap between earnings and expenditure will widen dangerously.
From age 60 to 75, this individual would require ₹5.75 lakh per month to sustain his lifestyle. Financial planners estimate that to achieve this, one would need a retirement corpus of ₹5 crore ready at the start of retirement. This amount, if invested wisely, can ensure a peaceful and financially secure retired life.
A Systematic Withdrawal Plan (SWP) offered by mutual fund companies is one of the most effective ways to generate a steady income after retirement. Unlike a Systematic Investment Plan (SIP) where you invest regularly, SWP allows you to withdraw a fixed sum at regular intervals—monthly or quarterly—while your remaining investment continues to earn returns.
For example, a ₹5 crore corpus invested in mutual funds earning an average of 12% per annum can provide around ₹5.80 lakh every month, helping to beat inflation even during retirement.
Creating a ₹5 crore corpus may seem daunting, but it is achievable through disciplined investing. If our example investor starts a SIP of ₹6,270 per month at age 30, increasing the amount by 10% each year, and earns an average of 12% per annum, he can accumulate ₹5 crore in 30 years.
Example:
Year 1: ₹6,270 per month
Year 2: ₹6,897 per month (10% increase)
Year 3: ₹7,586 per month (and so on)
Historical data shows that equity mutual funds—including Small Cap, Large Cap, and Flexi Cap categories—have delivered 12% or more returns in the long run. This is significantly higher than fixed-income schemes like the Public Provident Fund (PPF) or bank fixed deposits. For investors aiming to outpace inflation, equity mutual funds remain a preferred option.
Simply saving ₹1 crore without investing will see that amount lose value rapidly due to inflation. The key is to ensure your investments grow faster than the inflation rate, preserving and increasing your purchasing power.
While equity investments are essential for higher returns, other pension schemes also play a role:
PPF (Public Provident Fund): Offers 7–8% returns with tax benefits, backed by government security. While returns are lower than equity, it remains a safe and reliable option.
NPS (National Pension System): Divides investments between equity and debt, making it a long-term, disciplined retirement tool.
Retirement planning is not just about saving money—it’s about preparing for decades of rising costs. Start early, invest smart, and use a combination of tools: SIP during your earning years, SWP after retirement, and safe options like PPF and NPS for stability.
Because the lifestyle that costs you ₹1 lakh a month today could cost you ₹5.75 lakh a month tomorrow—and the best time to prepare for that reality is now.
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