Medical inflation
Why healthcare costs deserve their own, higher inflation assumption in a retirement plan.
General consumer inflation in India has typically run in the mid-single digits in recent years. Private healthcare costs have risen meaningfully faster — commonly cited estimates put medical inflation around 12-14% annually, driven by rising hospital, diagnostic, and treatment costs that outpace the broader consumer price basket.
That gap compounds into something significant over a multi-decade retirement — but a flat 12-14% held for 30 years would overstate the real number, since that rate rarely persists that long. The Retirement Planner instead tapers medical inflation from its starting rate down toward general inflation plus a couple of points over about 15 years, then holds it flat, matching how actuaries actually project healthcare cost inflation. Even tapered, the gap is real: an expense that costs 8 lakh today, growing at general inflation of 6%, costs roughly 34 lakh in 25 years — the same expense under the tapering medical curve costs closer to 73 lakh over the same period, more than double, even after the rate has spent a decade converging back toward general inflation.
Healthcare spending also isn't evenly spread across retirement — it tends to be a small share of spending early on and a much larger share later, exactly when a portfolio has had the most time to be drawn down. A plan that applies one blended inflation rate to all spending can understate this late-life cost significantly.
That's why the Retirement Planner splits spending into a regular bucket and a separate medical bucket, each with its own inflation rate, rather than applying a single inflation assumption to everything — and why the Health Cover Adequacy Calculator exists specifically to show how a fixed insurance sum insured loses real value against this faster-growing cost over time.