In short:One typical error is to think that retirement savings will always be worth the same amount of money. For instance, over the course of 25 or 30 years, inflation will cause a ₹5 crore corpus to significantly lose purchasing power.
Let’s discusses the impact of inflation on the value of retirement savings over time in short.
It examines two scenarios:
1. A person who starts working at age 25 and retires at age 50, with a Rs 5 crore corpus. After 25 years, the value of this corpus will be reduced to around Rs 1.17 crore due to 6% annual inflation.
2. A person who starts working at age 25 and retires at age 60, with the same Rs 5 crore corpus. After 35 years, the value of this corpus will be reduced to around Rs 51.62 lakh due to the compounding effect of 6% annual inflation. The key takeaway is that the longer you wait, the more inflation will erode the real value of your money. It’s important to invest in a way that your returns comfortably outpace inflation in the long run.
