How inflation will shrink your Rs 1 crore to Rs 25 lakh in 25 years – taxes make it worse!
One of the best things about investing is the compounding benefit that helps your money grow over time. But on the other hand, inflation is a harsh reality that slowly reduces the value of your same money, no matter how or where you invest.
Now think about it, if you invest Rs 21,000 every month in a mutual fund that gives 12% annual return, and you continue this investment without stopping for 15 years — how much money will you have? Rs 1 crore – that’s what you have!
With this interesting figure begins a thought-provoking social media post by one finfluencer Akshat Shrivastava. In this post on ‘X’, he explains how three forces — compounding, inflation and taxation — play hide and seek with your money and how financial unawareness or illiteracy hit your investments and returns further.
So let’s understand them a little better, one by one…
The magic of compounding
You must have heard about compounding. It is often referred to as the 8th wonder of the world — and frankly, the saying is not wrong. Compounding means that the interest your investment earns starts earning interest itself. And as time goes by, this effect gets stronger.
Rs 21,000 monthly SIP, 15 years, 12% return = Rs 1 crore
Sounds like a very simple and manageable amount, right? But just think, if you keep investing with utmost honesty and discipline, it can become a big fund over the years. That’s the real power of compounding.
But the story is not over yet…
Inflation – The silent money eater
Now we come to the real villain — inflation.
While you are investing diligently and growing your money, inflation is silently reducing the purchasing power of your money. Today, Rs 1 crore seems like a huge amount. But if inflation remains around 7%, then the value of that Rs 1 crore will decrease significantly in the coming years.
After 10 years: Rs 1 crore will be worth just Rs 50 lakh
After 15 years: Will be reduced to Rs 36 lakh
After 20 years: Will be equal to just Rs 25 lakh
That is, the money has increased, but its real strength has been lost due to inflation – an invisible predator that slowly sucks your hard-earned money.
Tax – the legal part of the government
Now suppose you want Rs 1 crore in your hand, that is, after tax deduction. So will earning Rs 1 crore be enough? Absolutely not.
If you fall in the 30% tax bracket, you need to earn around Rs 1.4 crore to be left with Rs 1 crore after paying taxes.
This is the power of taxation — it demands a portion of every penny you earn. And the demand is legal. Paying taxes is not wrong, but if you don’t plan it properly, you can easily eat away at your savings.
Stupidity – the costliest mistake
Now think differently. Suppose you suddenly inherit Rs 100 crore — a dream scenario, right?
But if you don’t handle that money properly, don’t plan your investments, or simply make the wrong decisions, you could lose all that money in just one year.
This is the real power of stupidity — or the cost of financial illiteracy. It’s not enough to have money. It’s also important to manage it wisely and strategically.
Ostrich Mentality – The cost of ignoring it
Many of us often forget a small but important thing while investing—fees and commissions.
Now suppose you invest in a scheme that charges just 1% more commission every year. Initially, this difference seems very small. But when you look at a longer period of 30–40 years, this 1% can wipe out almost 30% of your portfolio.
-SIP of Rs 21,000 for 40 years, if the return is 11% = Rs 14.78 crore
-Same SIP, if you get 12% return = Rs 19.58 crore
Just a 1% fee reduced Rs 5 crore from your entire fund!
Shrivastava calls this the “power of being an ostrich”, when we ignore the important things and just think that everything will be fine on its own.
So what is the lesson at the end?
Wealth creation is not magic. It is not just about earning money and investing it anywhere. It is important to see and understand the whole picture of this game.
Remember, compounding makes money grow, inflation reduces its value, taxes reduce its amount, stupidity can wipe out everything and ignorance can lead to a loss of crores.
This brilliant post by Shrivastava makes one thing clear — personal finance is not a game of numbers, but a journey of understanding, discipline and foresight.
So the next time someone says “Rs 1 crore is enough for retirement” — wait for a moment. Think about it — today’s price, or 20 years from now”