How can I guess the future rate of inflation and household expenditure? I am 10 years away from retirement.
- Dukaharan Mukherjee
My honest suggestion is that you can't guess such things because of several reasons. One is that core inflation that the government discloses itself is not your inflation. You have a certain lifestyle cost and the flexibility of changing your lifestyle is something that you can only predict. There are things which are very personal for you. There are certain expenses, for me, like things that I like and I am used to spending money on them. At the same time, there may be people for whom that expense would be unimportant. These people may think that if I have to discontinue this expense, it won't be a great deprivation. But it's you who is the best judge here.
Also, one has to have a little imagination and here I think the past could be an indicator. You will be getting surprises in terms of healthcare costs and you can safely guess your health conditions or your lifestyle which can be a pointer to your health conditions in the future for which you need to prepare. Another way of looking at it is that because you are 10 years away from retirement, plan liberally and factor in high inflation supporting all the income but focus on income, investments and savings right now. If you do that, you will have the margin of error. For example, if you need Rs 80 lakh by a very precise calculation in your retirement, provide for Rs 1 crore or Rs 1.20 crore, that is the margin that you should have. You may get lucky and may require less and that is a very happy situation to be in as compared to a situation where you end up with barely enough at the time of your retirement.