1. It's a fact that financial planning based on nominal inflation rate is very dangerous for meeting retirement goals, even worsening as our earning years go by.
2. Just for info, 38-year CPI inflation has galloped at 7% CAGR, with last 5 years being between 4-9%.
3. For meaningful retirement planning,
a) Living expenses can be expected to increase at the average rate of inflation, but
b) Medical expenses, travel and leisure expenses are likely to increase at a higher rate.
4. Hence, we should calculate retirement cost for each head by using the formula:- (Current expense) x ((1+ rate of inflation)/(years to retirement)), by factoring in 6-8% inflation rate for next 30 years.
5. Thereafter, we should start long-term SIPs in 1/2 multicap MFs to achieve this target, and also buy a suitable health insurance plan, with lifelong renewals, at the earliest.
2. Just for info, 38-year CPI inflation has galloped at 7% CAGR, with last 5 years being between 4-9%.
3. For meaningful retirement planning,
a) Living expenses can be expected to increase at the average rate of inflation, but
b) Medical expenses, travel and leisure expenses are likely to increase at a higher rate.
4. Hence, we should calculate retirement cost for each head by using the formula:- (Current expense) x ((1+ rate of inflation)/(years to retirement)), by factoring in 6-8% inflation rate for next 30 years.
5. Thereafter, we should start long-term SIPs in 1/2 multicap MFs to achieve this target, and also buy a suitable health insurance plan, with lifelong renewals, at the earliest.