So you’ve decided to start planning for your retirement. Great decision. While you’re at it, don’t forget to look at what should be one of your biggest concerns: Inflation.
A litre of milk cost ₹5 in 1990. Today, you’ll be shelling a ₹40 for the same quantity of milk.
Inflation reduces the buying power of your money. Of course, you’ve heard that before. Most people, understand the meaning of that well, don’t seem to be as worried about it as they should.
So here’s another way to look at it: in 1990, let’s say you put ₹100 in a shirt pocket and stashed the shirt in an almirah. In 2017, if you peeked into the same pocket, you’d find only about ₹14 left. Or, in 1990, if that ₹100 bought you 100 pieces of chewing gum, you’d get only 14 pieces for the same ₹100 in 2017. Painful, isn’t it?
You might have all sorts of fires to douse at present and resources might not seem enough. Problems in the present almost always seem more important than the issues of the future. Until the future problem comes to the present that is. Start investing for retirement as early as possible. Remember, the sooner you invest, the more you’ll have at retirement.
You are going to live longer than your grandparents did, that’s certain (almost). Improvement in healthcare and lifestyle is going on extending people’s lives all over the world. The longer you live, the more money you’ll require.
The longer you live, the longer you’ll work. This can prove to help your retirement investments. More people are opting to push retirement for a later date, therefore are able to earn more and for longer. Often, this push is fueled by their insufficient funds. If done well, retirement planning can allow you to quit work much before than others.
The older you get, the more you’ll have to spend on healthcare. Medicines, tests, treatments, maybe even a nurse at some point, all will go on burdening your wallet as you age.
You might be happy flying economy today, but as the years go by and your paycheck rises, you might switch to business class. If you plan your retirement based on your lifestyle today and in a few years your lifestyle improves, switching back to economy seats after retirement will sting. Especially at an age when you need the comforts of business class more. Even better, if you continue living below your means today, you’ll have more money to invest today and consequently, even more, money to throw around after retirement.
You must plan to save as much for your retirement as possible. If the rate of inflation remains similar, you’d be prepared for it. If the rate of inflation is less, you’d have a lot more than you’d planned to have after retirement. However, if you’re very unlucky and the rate of inflation is greater than what you planned for, you will have to make compromises in your winter years. How well you insulate yourself from such ugly surprises would depend on how much extra you’d have saved.
If you start investing early in your life, the number of years for the magic of compounding to grow your money will span more than three decades. Even a small difference in the rate of return on your investments can have a magnified effect at the time of your retirement. So be sure to ascertain your risk taking ability and opt for the investment adding the most value to your funds.
It is no surprise, the people complaining most about inflation are old people. In the UK, inflation was very low for about two decades. People who were young in that era didn’t foresee inflation affecting them. Now, UK is rated as a country where the preparation for retirement is one of the worst in the world.
Start preparing early and you will soon be able to save enough to support your needs, and also your wants.