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Inflation Calculator: What Will Be the Value of ₹100K in a Few Decades?
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Why ₹1 Lakh Today Won’t Have the Same Value in the Future
If inflation continues at a steady rate of 4% per year, the value of ₹1 lakh will decrease significantly in the future. This highlights the need to factor inflation into your long-term financial plans.
Inflation constantly reduces the purchasing power of money, meaning the same amount of money will buy fewer goods or services in the future than it does today. That’s why it’s crucial to consider inflation when planning your finances for the future.
Where:
- FV = Future Value
- PV = Present Value (e.g., ₹100K)
- r = Inflation Rate (e.g., 0.04 for 4%)
- n = Number of years
This calculation will help us understand how inflation erodes the value of money over time, as long as it stays within the RBI’s target range.
If we assume an annual inflation rate of 4%, the value of ₹1 lakh today would decrease to around ₹46K after 20 years. This means that what ₹1 lakh can buy today will only be worth Rs 46K in 20 years, due to inflation’s compounding effect.
Continuing with the same 4% inflation rate, ₹1 lakh will drop further to about ₹24K after 30 years. This demonstrates how inflation steadily erodes purchasing power over time.
Looking even further ahead, in 40 years, ₹1 lakh will be equivalent to just ₹12K if the 4% inflation rate persists. This stark decrease shows how significantly inflation can reduce the future value of your money.
Understanding the Impact of Inflation on Future Expenses
Lets say you have monthly expenses of ₹1 lakh and you’re currently 30 years old, it’s essential to understand how inflation will affect your financial future. With the current inflation rate at 4%, and assuming it stays consistent for the next 30 years until your retirement, you’ll need to calculate how much money you’ll require to maintain your lifestyle.
As you plan for retirement, consider that your expenses may increase due to factors such as raising children, funding their education or marriages, or purchasing a home. For simplicity, let’s assume you want to maintain the same standard of living with your current monthly expenses of ₹1 lakh. Here’s a breakdown of how inflation will affect your future financial needs.
Example 1: Monthly Expenses of ₹1 Lakh
- Current Monthly Expenses: ₹1 lakh
- Current Age: 30 years
- Inflation Rate: 4%
- Years Until Retirement: 30 years
To maintain your current standard of living with monthly expenses of ₹1 lakh, you will need approximately ₹3.24 lakh per month by the time you retire.
Example 2: Monthly Expenses of ₹3 Lakh
- Current Monthly Expenses: ₹3 lakh
- Current Age: 30 years
- Inflation Rate: 4%
- Years Until Retirement: 30 years
To maintain your current standard of living with monthly expenses of ₹3 lakh, you will need approximately ₹9.73 lakh per month by the time you retire.
Example 3: Monthly Expenses of ₹5 Lakh
- Current Monthly Expenses: ₹5 lakh
- Current Age: 30 years
- Inflation Rate: 4%
- Years Until Retirement: 30 years
To maintain your current standard of living with monthly expenses of ₹3 lakh, you will need approximately ₹16.21 lakh per month by the time you retire. This calculation reflects the reduced purchasing power due to inflation.
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