Our income stops when we retire. However, with increased life expectancy, our lives may extend 20-30 years post-retirement, making it essential to invest in a retirement corpus during our working years.

However, the bitter truth is that the prices of commodities also rise due to inflation. 

Explains Shweta Jain, CEO and founder of Investography, a financial planning firm: “Take the inflation figure for India at six per cent per annum. But education and healthcare inflation are higher at close to nine per cent. So, when saving for goals like retirement, don’t just take numbers at today’s value. See what inflated value will be like, so that you have the same lifestyle and same purchasing power.”

So, here’s how to go about creating an inflation-proof corpus for your retirement.

Get an idea of the required retirement corpus: When saving for a goal, it is important to have an idea of the amount required for that goal. In case of retirement, it includes several calculations. 

Let us illustrate this with an example. Let us say, you are 35 years old and will retire at 60. Your current expenses are Rs 50,000 per month. Assuming that you will live till 80 and the inflation is six per cent, your monthly expenses at the time of your retirement will be Rs 2.14 lakh.

Now, if we assume a post-retirement return of six per cent, you would require to build a total retirement corpus of about Rs 5 crore. Assuming your current retirement corpus is zero, If you are investing in instruments that offer a return of seven per cent, you need to invest around Rs 62,000 every month, while if your investments give you a return of 12 per cent every month, you would require a monthly investment of about Rs 27,000. 

Choose the correct investment: It is important that your investments offer you returns that beat inflation. 

Says Nitin Rao, head, products and proposition, Epsilon Money Mart, a wealth management firm: “The truth is that if your interest rate is less than the average inflation rate, then your purchasing power will be compromised, and your investments are likely to get wasted. Beating inflation requires looking beyond traditional investment options. You need to invest in stocks, mutual funds, real estate, gold, and exchange-traded funds (ETFs) to ensure that your portfolio stays inflation-proof, and your investments provide a hedge against rising inflation. Thus, have a basket of inflation-beating assets in your portfolio.” 

Adds Jain, “Equity works best when invested regularly. Increase your monthly contributions over the years as your income increases. Keep a target in mind by working on retirement calculators, so you know how short you are falling, or how much more you need to invest. Don’t be shy about being aggressive in investing toward retirement. Also remember, you don’t need everything on the day you retire, you still have a good 20 years-plus post-retirement, even if you retire at 60. So, stay invested in equity even at retirement, once you secure your cash flow for three years or so.”