Planning
How big a SIP do you need to retire? A 5-minute method
Retirement planning sounds intimidating, but the back-of-the-envelope version is four steps. Here’s the logic — then let the calculator do the arithmetic.
Step 1 — Today’s monthly expense
Start with what you actually spend each month now, excluding things that vanish in retirement (your own EMI once the home loan is done, your kids’ education, your retirement savings themselves). That’s your baseline.
Step 2 — Inflate it to retirement
Money buys less later. At ~6% inflation, costs roughly double every twelve years — so an expense 24 years away is about four times today’s number. This inflated figure is what you’ll actually need each month on day one of retirement.
Step 3 — Size the corpus
Your corpus has to fund decades of that inflated expense while still earning a (lower, safer) return. A common shortcut borrowed from the West is the “25× annual expenses” rule (a 4% withdrawal). India’s higher inflation argues for being more conservative — closer to 30× annual expenses (about a 3–3.5% first-year withdrawal) gives a sturdier margin. So: inflated monthly expense × 12 × ~30 ≈ the corpus you’re aiming at.
Step 4 — Work back to a monthly SIP
Finally, figure out the monthly investment that grows into that corpus by retirement, at a realistic pre-retirement return (equity-heavy portfolios have historically done ~11–12% over long horizons, though nothing is guaranteed). The earlier you start, the smaller the SIP — compounding does the heavy lifting in the final years, so a decade’s head start can halve the monthly amount needed.
All four steps are built into the Retirement calculator — plug in your age, expense, and assumptions and it returns the corpus and the monthly SIP in one shot. Two habits make the biggest difference: starting early, and stepping the SIP up every year as your income grows (the SIP calculator has a step-up field to show the effect).