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Friday 21 October 2011

Early Retirement Killer : Inflation

The single biggest obstacle I foresee to any plans for early retirement is inflation.  Yes, I believe this is a bigger challenge than even accumulating a large enough corpus in the first place to enable retiring early.  India continues to reel under the pressure of rampant inflation, ranging from 8% to 10% in recent times.  The inflation rate is not the same across the various components of my expenses.  In particular there are three areas that seem to have persistently high levels of inflation that show no signs of letting up.

Health care:  The cost of medical care, hospitalization, routine doctors visits, and medicines, continues to go up at what feels like an ever quickening pace.  Health care premiums also continue to shoot up at the same pace, as insurance companies have to raise rates to remain viable. 

Education:  Learning, which should ideally be accessible to every single person, also seems to be becoming more expensive everyday.  Tuition fees from nursery and day-care, to higher education professional degrees are becoming prohibitively expensive. 

Real Estate:  In India real estate has always been expensive, but in recent times, has seen a phenomenal increase in per sqft rates.  Everyone wants to own a piece of real estate, and the increased demand is resulting in continually increasing real estate prices. 

The key challenge I see going forward, is that I will definitely need access to health care and education (for my kids) and potentially also buy real estate (either for my self, or as an investment for rental returns)  But due to steep inflation rates in these areas, (and certainly my salary is not increasing at the same pace) I am getting priced out of the market.  In other words, as time goes by, I will be able to afford less and less, in the health-care, education and real estate space. 

Do you feel the same way? and do you have any suggestions on how to deal with this?

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