If you are serious about your finances in life than moneycontain retirement calculator with inflation is a must tool you should use in order to find out, how much you may need to save every month to reach your desired retirement goal keeping the inflation in perspective.
There are many retirement planning calculator available online but none of them takes account of inflation rate, which means it is a half truth. Moreover, those retirement calculator will ask you tonnes of question to submitted before they show you the result.
Hence, at moneycontain keeping the practicality of the situation, retirement calculator with inflation is developed to be used anytime and within 4 simple steps it tells you the monthly saving to reach the retirement goal plus it tells you the future value of the retirement corpuses in present terms keeping the adjusted inflation rate in mind.
As an investor you should know the (TMV) “time value of money” the value of money does not remain the same across time. Meaning, the value of Rs.100,000 today is not really Rs.100,000, 5 years from now. Likewise the value of Rs.100,000, 5 years from now is not really Rs.100,000 as of today.
Whenever there is motion of time, there is an element of opportunity. Money has to be accounted or adjusted for that opportunity. Therefore, we have to keep inflation in mind whenever we make any investment in different financial instruments and even while you plan for retirement.
Whether you earn and invest in dollars, rupees, pounds, euros or any other currency it does not matter.
In order to use the retirement calculator with inflation you just need to enter the exact amount you would want when you will retire, enter the tenure in months when you think you will retire, enter the cagr returns earned from investment and at last enter the average rate of inflation during the investment tenure i.e. till retirement.
So, go ahead now and try it out yourself below using retirement calculator with inflation and see how much you need to save and invest every month to reach your retirement goals and also find out how much is the value of your retirement corpus keeping adjusted inflation rate.
If you are thinking, alright I understood the value of my retirement corpus will get decrease due to reverse inflation and the amount received is certainly going to miss the expected target goal, still can you tell me how much pension will I be able to generate?
Yes, it is very simple math, you only need to multiply you average life expectancy that is no. of years or months to monthly expenditure, for example let us say post retirement you want Rs.50,000 every month to spend in order to live a comfortable life, than just multiply this amount with no. of year (months) you think you are going to live.
Rs.50,000 * 240 months (20 years) = Rs.1.2 crore (This much amount will be finished)
But here is the thing even your expenditure is limited you cannot control the inflation outside,
I mean things you buy or use or everyday such as clothes, food, medical, household grocery rates etc. will certainly going to increase day by day. which leads us back to same old thing importance of investing.
So, instead of keeping it in a saving account in case the returns are less than 5 to 6 %, even your retirement corpus should be invested in low risk return instruments such as Fixed deposits or National Pension Scheme or Public Provident Fund (PPF) etc.
This way atleast the inflation can be beaten and it will not have any impact on your retirement corpuses.
I want to quote John Maynard Keynes, he said “The importance of money flows from it being a link between the present and the future”.
John Maynard was a British economist, whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments around the world.
Now, that you have calculated the amount you need every month to reach the specific target for your retirement and have also calculated how much decline will be in the retirement corpus you desired due to inflation, it is time to know how to fill this gap.
I mean below we will learn the different types of best investment options available to you as an investor and more important why you should invest at all? But before knowing the best options let us first take an example and understand how exactly moneycontain retirement calculator with inflation means.
What Is Retirement Calculator With Inflation?
A retirement calculator with inflation is a free online tool from moneycontain that helps anyone in estimating the amount of money required by an individual to lead a comfortable post-retirement life.
Not only this the retirement corpus calculator accounts the inflation and it’s impact on your retirement goal over a period of time.
So, if you want to know how much you need to save and invest every month to reach the desired retirement goal keeping the inflation in mind, than retirement calculator with inflation is a must tool you should use.
Let us understand this better through an example, Suppose you want to get Rs.2.5 crore after 15 years (180 months), assuming you get the rate of return from investment of about 17% per annum CAGR and average rate of inflation during the investment tenure i.e. 15 years to be approx. 5%p.a.
Usually average inflation rate stays in 3 to 5.5% range) by the way you can check the past average inflation rates in your country from here.
Check out the below image, I have filled the details as mentioned above in moneycontain retirement calculator with inflation.
Now, check out the result which surely going to surprise you or say even shock you 🤔😲.
As you can see to reach the retirement goal of Rs. 25000000 (2.5 cr) in 15 years (180 months) at a rate of return of 17% and 5% average inflation, you need to save and invest Rs. 30,584 every month, however the retirement corpus value of 2.5 crore which you will get will come down to Rs.1,20,25,427 due to inflation during the same tenure.
This means a decline of about 51.90% in retirement corpus and to cover that you will need Rs.1,29,74,573 more. It is indeed shocking isn’t. This is what is called time value of money, which changes and does not remain same.
How Retirement Calculator With Inflation is Useful For Me?
To better understand the usefulness of retirement calculator with inflation let me tell you a brief story of three friends, trust me you will not get bored and learn why investing is as much important as saving to live a better financial free life post retirement and it does not matter at what age you want to retire.
There are three friends by name Krishna, Dani and Kuldeep after completing their education, they started working in a company. All of them are of same age group and started working at 25, as they were very close friends all of them stayed together and enjoyed their company.
They decided they won’t work till retirement and wanted to open their own organization, but for this they need some capital, therefore all decide to save some money from their salaries and invest that in any mutual fund scheme till they reach 40.
This way they will have some money and together can start a small organization. However, when you are young saving and investing does not look a great idea.
Instead we want to enjoy and spend our money in buying luxury items, branded clothes, or may be in some other thing which we can’t discuss here?. It really takes efforts and patience to save and invest and very few people able to do it.
Mostly we are habitual of instant gratification, But those who do it will live better financial life afterwards. Coming back to these three friends Krishna was determined about his business and he started a monthly SIP with Rs.3000.
Time passed both Dani & Kuldeep were busy in their own life, when they reached 30’s one day Krishna asked them about their future plan and their savings, dani and Kuldeep told their respective situations or say excuses and why they did not started.
Dani realized as most youngster only realize when they either reach their 30’s or in late 30’s, he has to start saving and investing, krishna told him about his SIP of Rs.3000 a month.
Dani thought alright I am late but I can invest more than what krishna is investing so he started investing with Rs.4000.
After 5 Years passed Krishna again pointed them about their future business and plans, dani said oh don’t worry I too started it 5 years back and its even more than what you are investing.
Kuldeep standing nearby felt ashamed for a while and said sorry to both, he promised he will be investing now and much more than both. Kuldeep started Monthly SIP of Rs.7000.
When time came and they reach 40’s all of them decided to withdraw their respective investment and use it to start their dream company.
Keeping above calculation of their investment with time period (years) and taking an average of 12% returns on their investments, below image represent the same:
Below graph shows you the complete picture:
Woo, Even after investing more than dani and krishna kuldeep left far behind, if you see the total invested amount for all, it is only difference of Rs.60,000 but the amount received at the end to all of them have major difference.
This is what is called as power of compounding the early you start investing the more beneficial it is for you. I hope this gas clear your doubt now on why need to invest early in life.
Taking this story in back of your mind, retirement can be planned and should be planned as early as possible, one may give excuse as I have also given couple of time that it does not matter, you should live your life in present and forget about what is going to happen in future.
Yeah, this philosophical sentence is ok in some situation like for not taking much stress and anxiety about future but this does not mean to stop everything about future planning, one may be doomed if keep this thought running in mind.
Instead you should always have a plan specially if you have a family or someone to look after, therefore stop this rhetoric for god sake because
”Quality of your life depends upon how much you can concentrate and what you concentrate on”.
Lets us move on to see what are the best options available to save and invest money for retirement?
Best Investment Options To Achieve Retirement Goals?
The the amount of money you have as savings or you make stays the same with time and it will buy you less due to inflation. Inflation have a negative impact on your purchasing power, or the amount of goods or services your money can buy therefore it is always advisable to make investments as early as possible in your lifetime.
If you want the money to keep pace with inflation investing is the first and foremost thing which can save you.
Having said that most people focus on the risk of losing money while investing. They often get surrounded by negative thoughts, such as:
“If I invest money on something now, it may go down or even give negative return. However very few people look at the destruction of wealth by Inflation itself.
Let us see the type of financial instruments or asset that you can use to invest to overcome inflation.
There are different types of investment options available for everyone depending upon their need, below I have listed some of them. We will discuss in brief about which one have highest possible returns as well as the one’s those have limited risk profile.
1. Stock Market (Equity) – Investing in equities i.e. stocks can garner you greater CAGR returns, consider investing in them for long to medium term. However you need to keep in mind the risk associated while investing as they are highly volatile in nature and one wrong investment can lead to disaster.
For example: Tata Consultancy Services Limited (TCS) which is one of the leading IT company in India has given about 30% p.a. overall returns in last 10 years.
Auro Laboratories a leading pharma company has given about 42% return in last 5 years. Having said that there are bad examples too, but if you do proper technical and fundamental research than investing can be done in equities.
MRF shares have generated multi fold returns for the investors over the years.
If an investor had invested Rs 1 lakh in MRF shares 25 years ago, the corpus would have been worth Rs 74.02 crore in April 30, 2018 when the stock was its peak.
Even 1 share costed Just Rs.11 in the year 1993 which at the peak (2018) was around Rs.81,423.
Most of the experts in finance have suggested investing in equities as the best method to beat inflation in long run.
You can also make investments in Index such as Nifty50, FINNifty or Exchange Traded Funds (ETF’s) which gives atleast 15 to 25% cagr returns in short to long term.
2. Mutual Funds (SIP/Lumpsum) – Investing in mutual funds can not only generate better returns but also the risk associated while investing comes down significantly.
Most of us do not have much time reading and learning about investment and can’t track stocks every now and then, therefore investments in mutual funds whether through Systematic investment plan (SIP) or Lumpsum investment can be a great idea.
There are many Asset Management Companies (AMC) which offers various types of schemes depending upon your need and one can invest as low as Rs.100 per month even, and yes the returns are par when you compare it with normal FD or RD.
Having said that there is no guarantee of the returns it can be higher or lower depending on how the stocks have performed.
Equity Mutual Funds :
Interest Rate – 12-18%
Lock-in Period – No lock-in for open-ended funds. ELSS funds have a 3 years lock-in.
Risk Profile – Market-related risks
Taxation – Investment is Tax-free under section 80c.
Maturity -10% tax on long term capital gains.
Investors choose index fund such as nifty 50 index which purchase all the stocks in the same proportion as in a nifty index to invest because of less risks involved, Moreover if you checkout the returns for these indexes since inception, it has been approx. 15% p.a. cagr.
3. Investing In Commodities – Commodities such as gold and silver has always been a center of attraction not only for investments but as an traditional ethics in India. Which is good at one hand as these have always been used as hedge against inflation. When the value of currency decreases, commodity can be a safe heaven as its happened in 2020.
You may also invest in gold ETFs as well.
Having said that if you see the overall average gold returns its been between 5-12% moreover unlike a stock or a bond, it generates no cash flows in the form of profits, dividends, or interest income and time duration required for a commodity to give better return are higher, therefore when you count inflation in your returns it is still less comparing to other class of assets.
4. Fixed Deposits/Recurring Deposits/Bonds – These types of investment class are useful for medium to short term moreover the returns are guaranteed. However, if the inflation is higher during the investment tenure than your return on these instruments than there is no point doing so.
Still they are less risky and if you have more amount whether lumpsum or per month to invest than you should consider them. Moreover while investing instead of putting all eggs in one basket you should diversify the investment to other asset class such as mutual funds, equity etc.
SIPs are one way of averaging market volatility, especially in falling markets as the same quantum buys more units of exposure.
This does not mean at all not to invest in FD or RD, but at the same time you should have an eye on inflation and do tactical strategies to overcome it instead of just seeing the value of your investments getting eroded by the inflation.
Other than above methods there are other regular investment methods that you can do considering your retirement goals, few of them are listed below:
- EPF – Employee provident fund
- PPF – Public Provident Fund
- NPS – National Pension Scheme
- Debt funds
- Post Office MIS Scheme (POMIS)
- Equity Link Saving Scheme (ELSS)
- ULIPs or unit-linked investment plans
So, do not wait if you have not started investment, click on this link and Open free trading/demat/mutual funds account and Start Free trading, Investing In stock market, Best Mutual Funds Scheme (Equity, Debt, Hybrid, ELSS, ETF etc.) Online, Paper-less Within Minutes Now…
Frequently Asked Question (FAQ)?
What is a good retirement income?
There is nothing called a good retirement income or pension, this totally depends upon your expenditures post retirement, for example suppose you current age is 30 years and you made a retirement goal of Rs.10 crore when you will reach 50.
Any which ways this amount due to inflation during the same tenure even for 4.5% p.a. for 20 years will get reduce to Rs.₹58,535,714 assuming a 18% returns earned from investing.
Assuming you are taking the life expectancy of your to be max 100 years which means you have to spend Rs.5.8 crore which you will have cautiously for next 50 years.
During the same time this money which have got sill be getting impacted because of inflation, therefore you have to diversify some amount in low risk funds.
let us do a little math here, assume Rs.1 lacs per month is the expenditure, than you can survive for almost 97 years 3 years less. You can do your calculation from retirement calculator above.
You might be thinking this all is hypothetical situations, but trust me math is not hypothetical, it tells you the figure and numbers, you just have to find yours. So, retirement income or pension is dependent upon various factors and “one should always dream of moon so even if you fall you land upon stars“.
How much should I save to retire in 10 years?
You should not only save but invest too, saving will not going to work in real life situation. Hence whatever amount you can save for 10 years or so please try to invest that amount in different financials instruments available which can generate good returns in long term for you.
How do I calculate how much money I need to retire?
You can use moneycontain retirement calculator with inflation to calculate how much you need to save every month for post retirement. It gives you the exact picture keeping the inflation perspective while calculating.
What will be my pension when I retire?
The pension amount after retirement depends on a number of factors. The monthly amount saved and invested during the active working years will add up to the pension amount after retirement.
The type of retirement plan too influences the pension amount as market-linked products like ULIPs, ELSS, SIP’s may have a probability to generate higher returns over the long term horizon.
How much money do I need to retire comfortably?
Depending upon your lifestyle and retirement goals the exact money needed to retire varies from people to people and depends on the monthly expenses post retirement.
While calculating the retirement corpus, do not forget to take into account inflation, different expenses apart from the necessary expenses like healthcare.
Another important factor that has an effect on the retirement corpus is the age of retirement. One will require a larger corpus if you are planning to retire early.
Is 1 Crore enough to retire?
The required retirement amount is not equal for all individuals. 1 Crore may be sufficient for someone, but may not be enough for many individuals. The retirement amount depends on the post-retirement expenses of an individual. Hence, one needs to plan for as per their own risk appetite and needs.
Moreover count in the no. of years you need to survive post retirement and also the inflation during the same tenure.
Conclusion:
I hope you have completely understood the concepts behind inflation and have used the Retirement calculator with Inflation to know the money you need to save and invest every month.
Understanding of inflation in life makes you better at spending, investing, saving at correct time.
The first step you need to take to start saving is setting your savings target. Until and unless you have a set goal, your plan will be directionless. Start by deciding your savings target so that you are financially secure after retirement.
So make sure and planned the things accordingly to be at better position than others post retirement, not only for you but for your family and children. For example as general rule of thumb start savings:
In your 20s: Aim to save 25 percent of your overall gross pay
By age 30: Have the equivalent of your annual salary saved
By age 35: Have twice your annual salary saved.
By age 40: Have three times your annual salary saved.
By age 45: Have four times your annual salary saved.
By age 50: Have five times your annual salary saved.
Not only save but invest that money to every month in anything which suits your risk appetite.
Nobody on this earth have imagined that we might be dealing with a pandemic such as Coronavirus in 2020-21, people have lost their jobs, business have been hampered drastically, economies throughout world have suffered enormously.
It is not easy to set things up how it was earlier, even if that have not happened, suppose you get fired from your job or you don’t want to do job further, assume you met an accident, do not get me wrong I am not hoping for these bad things to happened to anyone, I am just trying to point out – life is ruthless and at the same time unpredictable.
Saving and investing should be done by everyone at the very beginning of your life and should continue till you know this much would be enough for me to take a retirement or be financially free.
Want to learn about stock market step by step than do read this amazing stock market guide designed specifically for beginners to clear the concepts in easy language.
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Note: Please do not take this as any recommendation, to trade or invest. This is just for reference, to make you understand more about Retirement Calculator With Inflation and its importance, under no circumstances intended to be used or considered as financial or investment advice, a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset.
Please do your own research and make investment. Moneycontain will not be responsible for any of your losses at all. The point made is for educational purpose only. All investments are subject to risks, which should be considered prior to making any investments.
