Planning
What will ₹1 lakh be worth in 10, 20 and 30 years?
At 6% inflation, ₹1 lakh in 20 years will buy only what about ₹31,000 buys today. Put another way, something that costs ₹1 lakh today will cost about ₹3.2 lakh in 20 years.
How inflation shrinks ₹1 lakh (at 6% a year)
| Years from now | What ₹1 lakh will buy in today's money | What today's ₹1 lakh purchase will cost |
|---|---|---|
| 10 years | ₹55,839 | ₹1,79,085 |
| 20 years | ₹31,180 | ₹3,20,714 |
| 30 years | ₹17,411 | ₹5,74,349 |
India's inflation has averaged around 5% to 6% over the long term, though it varies year to year. At 7%, today's ₹1 lakh purchase would cost ₹7.6 lakh in 30 years.
Your monthly expenses in the future
If your family spends ₹50,000 a month today, the same lifestyle will cost about ₹1.6 lakh a month in 20 years and ₹2.87 lakh a month in 30 years. This is why retirement goals that sound big today often turn out too small.
Where ₹1 lakh grows in 20 years
| Where you keep it | Assumed return | Value after 20 years | Beats 6% inflation? |
|---|---|---|---|
| Savings account | 3% | about ₹1.81 lakh | No |
| Bank FD, 30% tax bracket | 7% before tax, about 4.8% after | about ₹2.56 lakh | No |
| Equity mutual fund | 12% (not guaranteed) | about ₹9.65 lakh | Yes |
To simply keep up with inflation, ₹1 lakh needs to become about ₹3.2 lakh. For people in higher tax brackets, FDs and savings accounts lose buying power over long periods.
What to do about it
- Keep 6 months of expenses in a savings account or FD for emergencies. Safety matters more than returns for this money.
- For goals 10 or more years away, consider equity mutual funds through a SIP, which have historically beaten inflation over long periods.
- PPF at 7.1% tax-free stays ahead of 6% inflation and suits the safe part of long-term savings.
- Raise your SIP every year so your savings grow along with prices.
Plan a SIP that beats inflation
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