How much will the fund be?
In today’s times, Rs 1 crore is considered a strong fund for retirement. Many people consider this as the goal of financial freedom and save. But in the changing economic environment this thinking may be incomplete. Inflation keeps reducing the real value of money over time. In such a situation, the amount which seems big today may prove to be small in future. The question is not just how much you add, but also how much buying power that money will have in the future. In India, Rs 1 crore has long been considered a safe and sufficient fund for retirement. But this perception now needs to be changed. Inflation is continuously reducing the value of money, due to which the real value of this money may reduce significantly in future.
If we assume an average inflation rate of 5-6%, then in the next 20 years the purchasing power of Rs 1 crore may be halved or even less. This means that the lifestyle you can maintain today with Rs 1 crore may be difficult to maintain in 2046. This will have a direct impact on your retirement quality. The biggest mistake people make in retirement planning is that they focus only on the amount and not on its future value. Actually, retirement is a long period, which can last for 25-30 years. During this period the expenses keep increasing continuously.
Especially healthcare expenses are increasing rapidly, which can become the biggest expense in old age. Apart from this, the cost of living, lifestyle expenses and daily needs are also becoming expensive in cities. Due to longevity, money is required for a longer period, due to which there is a risk of the fund getting exhausted quickly. Not only this, expenses like children’s education, marriage or sudden medical emergency can also put pressure on your savings. If all these factors are ignored, a target of Rs 1 crore may give you a false sense of security. Therefore, it is important that while planning retirement, a big and realistic target should be set keeping inflation in mind.
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