Why Is It Important To Factor Inflation Into Retirement Planning?

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term Plan

Protect Your family’s financial future with Kotak e-Term Plan. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Health Shield

Insurance against medical expenses related to heart, brain, liver and Cancer. Know more

Inflation: A Key Factor to Consider into Retirement Planning

Inflation: A Key Factor to Consider into Retirement Planning
  • 27th Aug 2021 |
  • 659

Investment in a retirement plan can be rewarding in the future only if you plan wisely, keeping in mind all the critical factors. Inflation is one such factor that plays a vital role in analysing your requirements during retirement years.

Let’s understand further the inflation factor and its significance.

What is Inflation?

The inflation percentage signifies the average price change of various goods and services, including food, housing, transport, entertainment, etc., over the year. It indicates the downfall in the purchasing power of a single unit of currency. As inflation increases, this purchasing power of money decreases, thereby making your living expenses go higher.

Why is Inflation a Significant Factor While Planning Your retirement?

Since the value of money decreases with time, it shoots up our expenses every year, which is indicated by the inflation rate. If we look at India’s inflation rate for the last two years, it was 4.76% for 2019 and 6.2% for 2020.

When you plan your retirement, which is 20-30 years ahead, your monthly expenses are expected to be way higher in the future than today if we consider this yearly inflation. Hence, to arrive at an effective estimate of your financial requirements during retirement, you must apply an approximate inflation rate while calculating the retirement corpus.

Let’s understand this with an example.

Your yearly expenses stand at Rs. 2,00,000 for the current year. Assuming a consistent inflation rate of 3% yearly, you will need 2,03,000 Rs to address the same expenses next year. Similarly, it becomes 2,09,090 Rs for the second year. Hence, it keeps on going up every year till your retirement and even beyond, resulting in a whopping amount.

Therefore, without considering the inflation, a retirement savings plan cannot be effective enough to address your finances during retirement years. While the commodities will be inevitably costlier in the future, the medical and healthcare expenses will also be higher by the time you plan to retire. Hence, estimate the future medical costs considering inflation and your age when you may need extra medical care and support.

How to Estimate the Retirement Corpus Using Inflation?

It is convenient and easy to calculate the corpus while including inflation as an important factor, using the online retirement corpus calculators. Most leading banks and financial institutions offering retirement plans provide such calculators on their websites. It takes, as an input, various parameters, such as your current monthly expenses, years left for retirement, expected inflation rate, expected ROI, etc., and generates the corpus figure accordingly. rel=“nofollow” Use Kotak retirement corpus calculator to determine the investment you need to make to meet the financial goals by the time you retire.

Without a proper estimation of the corpus, a retirement plan may fail to support you financially during your retirement years. You can use the various online resources to compare the different plans, know the terms and conditions and make an informed purchase decision. Additionally, investing in a retirement plan online is easy; you can do it from the comfort of your home and stay on top of the investments.

Kotak e-Invest

In this policy, the investment risk in the investment portfolio is borne by the policyholder.


  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521


Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Can NRIs Invest in ULIP Plans Offered in India?

Demystifying the Retirement Planning Process

Importance of Retirement Planning

What are the Maturity Benefits in a ULIP Plan: Fund Value Sum Assured or Only Fund Value?

What Are Retirement Pension Plans?

Is ULIP a Good Option for People Above 60?

What are the Benefits of ULIP - Explained

Important Questions To Ask Yourself Before Choosing A Good Retirement Plan

Looking for Ways to Earn Lifetime Income in Retirement? Here Are 6 of the Top Options

What are the Chances of Losing all my Money in ULIP and How Much Return Should I Expect?

At What Age Should You Start Your Retirement Planning?

Different Types of ULIP Investments in India

Benefits of Early Retirement Planning in India

Benefits Of Retirement & How Investments Can Help You Enjoy Them

The Significance of Number 8,000 in Retirement Planning

What is Partial Withdrawal in ULIPs?

Different Types of Retirement Schemes

What are the Rules for Exit From NPS?

What are the Charges Levied on ULIP?

How Much Corpus Does One Need for Retirement?

What Are Mortality Charges In ULIP?

NPS for Housewife

What are the minimum and maximum investment in ULIP? Would the Whole Amount Insured in The ULIP Insurance be Invested in the Market?

What is the difference between Life Insurance and ULIP?

Types of Annuity Plan | Annuity Definition - Meaning & Key Benefits | Kotak Life

Top 6 Reasons Why You Should Get A Pension Plan

Do Pension Plans Allow any Death Benefits?

What are the 4 Financial Phases of Retirement? How to Budget For Each One?

How Safe is it to Invest in ULIP plans?

Worried About Running Out of Money in Retirement? 4 Tips to Avoid This Crisis

How is ULIP NAV calculated? How is the return calculated in ULIP?

How can NPS help you save tax?

Pros and Cons of Retirement Annuities

Advantages of Pension Schemes and Retirement Plans

What are the Uses of ULIP?

Are You Planning an Early Retirement? Here's Why Buying Annuity Plan Will Make Sense

What is Lock-In Period in ULIPs?

5 Retirement Planning Tips for a Financially Controlled Post-Employment Life

Difference Between Unit-Linked Insurance Plans and Non-Linked Plans

How Does NPS Work?

How Is ULIP Different from Other Life Insurance Plans? Where Can I Invest - ELSS, ULIP, or PPF?

Is ULIP Better Than FD?

6 Signs That You Are Not Financially Ready For An Early Retirement

How to Win at Retirement Savings?

How Does ULIP Work in India?

Are Annuities Great For Early Retirement?

Invest for your second innings with a guaranteed savings plan

How Can ULIPs Help You Plan for Your Child's Future?

Benefits of Early Retirement Plans

Why are ULIPs One of the Best Tax Saving Instruments?

Which are the Best ULIP Plans in India for Children?

Ten Signs That You're Ready to Retire

Is the ULIP Policy Surrender Value Taxble?

What is the Estimated Return Percentage on ULIP? Do Investors Get Compound Interest?

7 Secrets that can Make Your Post-Retirement Phase Prosperous

ULIP: Can You Surrender ULIPs or Withdraw Money from It?

How should one decide on fund allocation within NPS?

Retirement: A New Start to Life!

Is It Worth Buying ULIP Plans For 10 Years?

What is the Death Claim Payable in the Case of ULIP?

What is Premium Redirection in ULIPs Plans | ULIP Insurance Plans | Kotak Life Insurance

Best Insurance Plans for a Guaranteed Monthly Income After Retirement!

5 Steps to Gift a Smart Retirement Plan to Your Parents

Types of Pension Plans for Your Retirement

How to Build a Tax-Free Pension Income for Retirement?

Does Having Both ULIP Plan and Other Health Insurance Plan Make Sense?

Which Pension Plan Suits You best?

5 Notable Investment Options for Retirees

How To Invest Money In ULIP?

ULIP Plan or Traditional Insurance Plans - Which is better?

Why Should You Invest in NPS?

Getting Close to Retirement? Six Key Retirement Planning Tips That Can Help You Retire

How Quickly is Fund Switch Effected in ULIPs? Is it Done the Same Day or After a Particular Number of Days?

How has ULIP Grown Over the Last 3 years?

What is a Retirement Plan - What are its Features?

Why Should You start Retirement Planning as soon as you start a job?

10 Steps to Figure Out How Much Money You Will Need For Your Post Retirement Plans

5 Reasons to Buy ULIP for a Secured Financial Future

Retirement Planning Guide: These 5 Steps Will Help You Towards a Safe, Secure and Fun Retirement

5 Reasons Why ULIP Plans are One of The Best Retirement Planning Instruments

Why Should I Invest in ULIP?

Annuity Plan | How to Choose the Right Annuity Plan | Kotak Life

Is it Advisable to Withdraw the ULIP Insurance Policy After 5 Years?

What Are Superannuation Benefits?

Un-Retirement - Are You Ready For It?

Is ULIP a Complex Financial Product?

Save Early to Keep Living Your Dreams Post Retirement

What is ULIP and Its Benefits?

Meaning of Sum Assured in a ULIP

Give Your Retirement Savings A Booster-Shot with Annuities

Is it Suggestible to Take a ULIP Plan Linked with a Term Plan?

ULIPs or Pension Plans – Which is a Better Retirement Plan?

What are the Instruments Available for Building a Retirement Corpus?

How To Choose The Right Pension Plan?

What are ULIPs and their Types?

Types of Retirement Plans

Understanding Annuity Plans

Saving for approaching retirement with retirement insurance

What is the Minimum Lock-in Period for ULIP?

Can I Surrender My ULIP Policy after 2 Years?

ULIP Tax Benefits: यहां निवेश करने पर मिलते हैं 5 बड़े फायदे

Retirement and Pension Plans in India- What are Your Options?

How To Make Most of Your Money After Retirement?

Retirement planning with a systematic life insurance plan

What To Do With Your Retirement Accounts During An Employment Lapse?

Retirement Planning - How To Calculate Your Retirement Premium in India?

How To Calculate The Present Value And Future Value Of Annuities?

A Beginner's Guide to Understanding 401k Retirement Plan

Importance of financial Planning for Retirement

FAQs on Taxation of ULIPs

How Can I Achieve My Wealth Goal with ULIP Investment?

How To Keep Your Retirement Accounts from Being Hacked?

Know Why You Should Stay Invested in Your ULIP Plan

What are the Advantages and Disadvantages of ULIP?

Retirement Planning Guide for Working Men and Women

Top 4 Myths About ULIP Investments You Should Know

What is Fund Value in ULIP?

What Happens to ULIP Premiums Paid if the Market Crashes?

How Does Pension Plans in India Works?

यूलिप के फायदे (Benefits of ULIP in Hindi)

What Happens If I Stop Paying My ULIP Policy Premium After Paying the First Premium? Will I Still Get The Return?

What are the things to consider before buying ULIPs?

Retirement Planning for Millennials

Top 4 Mistakes To Avoid While Planning For Your Retirement

Is ULIP A Good Investment Option?

Why Should Retirement Planning Be on Top of Your Priority List?

What is an Annuity Plan and How Does Annuity Plan Works | Kotak Life

What are the Differences Between ELSS ULIP and Mutual Funds?

Who Gets the Benefit After the Maturity of ULIP: The Proposer or The Life Insured?

8 Charges in ULIP That You Must Know

Long Term Investment Guide for Your Retirement

Why ULIP Should Be a Part of Your Investment Portfolio?

Retirement Planning at 50? You Are Still Good to Go

What is NAV in ULIP, and How is it calculated?

Tips to invest your voluntary retirement scheme money

Here's What Retirement Would Look Like 30 Years From Now

5 Common ULIP Myths That You Should Stop Believing

Top 6 Flexible Benefits That ULIPs Offer

Managing Your Retirement Income with an insured retirement plan

Calculating a Retirement Corpus that can Support Your Lifestyle

Why You Should Invest In An Annuity Plan?

यूलिप के 8 शुल्क

A Quick Guide to Retirement Plans

How Has NPS Performed in Comparison with Other Instruments?

Why Are ULIPs Called Flexible Investments?

ELSS vs ULIP: Which is a Better Investment?

How Do Annuity Options Work In NPS

How to Choose the Best ULIP Plans to Invest in 2022?

10 Steps to Figure Out How Much Money You Will Need After You Retire

Do ULIPs Give Good Returns On Investments?

Terminologies You Should Understand About Retirement Plans

What tax benefits are there on saving for retirement?

Single Premium ULIP or a PPF - Which One is Better?

Which Is Better: ULIP or SIP?

Top Investment Options for Retirement Planning

What is the Difference Between EPF, VPF, and PPF? What are Their Tax Benefits?