Pension Planning: Factor in inflation to know your post-retirement monthly spend

Post-Retirement Planning: Financial security in post-retirement life of an individual is very important as at that time they need to take care of their health, food and pursue hobbies without being in a regular job. Therefore, retirement planning should pragmatic. One should plan according to their goals. The most important thing people need in their retired life is a regular income stream. 

Life expectancy of individuals has increased with improved medical and healthcare facility.  However, healthcare needs and other expenses increase when people live more.  Generally, the pension provided by employers is insufficient to fulfil the post-retirement needs. Therefore, individuals should take a pension plan that will fulfil all their needs.

"The inflation factor will make a big difference in future, therefore, one should always factor in this aspect. The notional value of money normally goes up, as inflation eats up gains," Jitendra Solanki, a SEBI-registered investment expert, said. The value of Rs 50,000 will not be the same after 30 years. Therefore, one needs to arrive at a notional value at a future date. The inflation may be more or less than expected in the future date. If it is more than expected then the pensioner will have to compromise in future spends.

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Besides pension funds, individuals should also build a corpus for emergency spendings, Solanki said.  Mumbai-based tax and investment expert Balwant Jain said, "The pension planning should be very pragmatic and calculated. Now, there are options to calculate monthly pensions. Individuals must put in the amount in the pension fund that will secure their life when the regular income stream will stop. For calculating the inflation they should also factor in the inflation rate they expect." 

Suppose you started putting Rs 5,000 every month in SBI pension fund from the age of 30 and your retirement age is 60 years, then you may get Rs 39,581 per month and a lump sum of Rs 14,84,305 at retirement.  However, if you calculate the inflation rate at 7 per cent, then today's value of Rs 5,000 will be equal to Rs 38,061.28 after 30 years. Therefore, Rs 39,581 per month might not be a sufficient amount after your retirement. 
 
Currently, three are the authorised  pension fund managers:
- SBI Pension Fund
- LIC Pension Fund
- Kotak Mahindra Pension Fund
- ICICI Prudential Pension Fund
- UTI Retirement Solutions Pension Fund LIC Pension Fund
- Reliance Capital Pension Fund
- DSP Blackrock Pension Fund Managers
- HDFC Pension Management Company