Will Rs 1 crore be enough to take care of all your needs after 15 years?

We receive many queries on our Facebook page from several mutual fund investors who want to create a corpus of Rs 1 crore after a decade or more. In some cases, the corpus is to take care of the retired life after 20 years. In others, the corpus is meant for children’s education or marriage after 15 years. Some investors haven’t identified any financial goals - they just want to create a corpus of Rs 1 crore after some years.

Whenever a similar question lands on the message box, it raises a lot of question in our heads: one, has the person just picked up a random number? Or has she worked with real numbers? Has the person accounted for inflation?

These questions are important. We have learnt from our interaction with our readers that many of them have an affinity towards round figures. And Rs 50 lakh and Rs 1 crore top the list of such numbers.


However, a big, round number may not be sufficient to take care of your financial goals. May be it is enough to take care of the goal today, but not after a few years when things become dearer. That is why you must work with real numbers to get a realistic target.

“When you have a goal, you have to plan your funds accordingly. Otherwise, you will fall short,” says Raghvendra Nath, Managing Director, Ladderup Wealth Management.

For example, just picking up Rs 50 lakh for your daughter’s education will not help. You should pick a number that would be enough to fund her education after, say, 15 years. First, you may find out how much your daughter’s education cost now. Then you can find out how much it would cost after 15 years.

This is important because the value of money does not stay same forever. For example, if the course fee Rs 20 lakh today. It would not remain the same after 15 years. Becaue of the impact of inflation, it would cost much more.

“To make investors understand the impact of inflation, ask them how much they used to spend 10 years back. Or, how much did they pay their driver five or 10 years ago. Once investors answer these questions, they will realize that inflation is acting and a random big figure will not remain worth the same after a few years,” says Nath.

Kishorkumar Balpalli, Founder, MyMoneySage.in, offers a simple calculation method: “For an instance. If you are preparing for your retirement, it is better to plan it this way- How much money would you need if your retire today, then you may add inflation for the number of years actually remaining for you to retire. This will help you reach a logical number.”

How much inflation? Five per cent or six per cent that we hear is the overall inflation. It is wise to add a realistic inflation figure to avoid it eating into your investments later.

Nath explains that not all things become dearer by same percentage. For an instance, education inflation in our country is almost 14 to 15 per cent. Likewise, marriage inflation is 14 to 15 per cent. We have seen that a buffet plate costs almost double after every five years. If you underestimate the price rise, you may end up with a lower sum for your goals.

While most of the other long-term goals are one-time, retirement goal is different. It requires you to create a sum for your post retirement life. You have to be more calculative and attentive while reaching your retirement corpus. Apart for inflation, you must consider possibility of your outliving your expected age and change in your annuity rates post retirement.

“If interest rates or annuity rates on your retirement money comes down from the expected rates, you will need more money to maintain the desired standard of living,” says Balpalli.

So, revisit your goals and recalculate your goal amount. You have to work with real numbers as only being a crorepati will not help. You may use online calculators or take help of an expert.