How inflation erodes savings over the years?

What are Unit-linked Pension Plans

Living long is everyone’s dream but outliving your finances can turn it into a nightmare. Spiraling cost of basic amenities is a constant threat to retirement savings. Better known as inflation, it is the single largest menace that gnaws away any form of savings.

Because inflation is like a silent operator working in the background, most individuals never notice its eroding effects on their finances, until it’s too late.

Inflation has a dual impact on the investor’s hard-earned savings. It not only erodes the current purchasing power of money it also magnifies the monetary requirements for the future.

Therefore the all-important question for the investor is – will his savings withstand the eroding effect of inflation?

Take an investor setting aside Rs 10,000 every month in a savings plan that fetches 10% return. Over 30 years, his corpus will grow to Rs 2,26,04,879, which in his view is a reasonable sum to meet his financial needs at that time.

This is of course the amount he will save, untouched by inflation.

Once you consider inflation – say 5%, then over a 30-Yr period, the sum will halved to Rs 1,13,02,440.

The 10% rate of return on the investment appears reasonable at first, until you factor in 5% inflation. This is the real rate of return – which is what matters at the end of the day.

One way to counter the eroding effects of inflation is by investing a significant portion of savings in equities – like a unit-linked plan (ULIP), particularly at a younger age when the investor has the appetite for risk.

The point to remember at all times is to earn a return good enough to go one up on inflation.


Show Full Article
Hide Full Article
Disclaimer ^


Products offered by HDFC Life :

Recent Posts
Subscribe to get the latest articles directly in your inbox
Successful subscribed
Subscription Successful

You will receive the newly posted articles on your email id.

Popular Posts


Speak to our Certified Insurance Experts

All days 9:00 AM to 9:00 PM IST

Instant Callback
Call Us

Mon-Sat 9:30 A.M to 6:30 P.M IST

Locate A Branch Near You
There has been changes in branch operation timings due to COVID 19
+91 8291 890 569   
Call Us

Mon-Sat 10 am to 7 pm IST (Local Charges Applicable.) (DO NOT prefix any country code e.g. +91 or 00.)

NRI Service
[email protected]

(For NRI customer only)

08000006609 to get details on your Fund Value
(Applicable for Unit Linked Plans only),
Premium Amount and Due Date
Stay updated with HDFC Life