How to calculate right amount of SIP for retirement planning?

Retirement planning requires a balanced portfolio and a proper prediction of your needs posts retirement. Know how you should plan for a comfortable retirement by planning for the right amount of SIPs to be invested in mutual funds.

Tortoise and Hare were companions, but their lifestyle and thinking power were as different as chalk and cheese. While tortoise liked to remain in the safety net, the hare was used to take the risks. Both started investing a corpus amount when they first got their salary. The hare invested in the stock market and invested his money in the equity-linked instruments, SIP and mutual funds, on other hand tortoise invested money in conventional investment avenues FD and PPF account.

However, when they retired, hare jaw dropped tortoise with its grandiose holiday plans while tortoise was set aback and furiously and he asked hare how your investments are more than me? Hare cautiously replied, "I invested in the right instruments and my wealth grew by 15% while your wealth stood at 8%". The moral of the story is it's good to invest frequently, but the conventional investments won't fetch you returns and they won't help you to win the retirement race. Hence, it is important to invest in the right instruments like SIP.

But the question arises how to calculate the right amount of SIP for the retirement planning
Think about the goals- Different SIP serve different purposes- some SIP are meant to meet your short-term goal while others are meant to achieve the long-term goals and yet others secure you from the emergencies. The Term Insurance Plan with SIP offers you the tax benefits and let you think about the family future. Here's a table that can help you understand what you can earn by saving just Rs 10,000 in a month.
Think about Goals for retirement

How much time you have- Mr. Pankaj, aged 45 years has a real estate worth Rs 83 lakh in its portfolio, cash in hand of Rs 50,000 and PPF amounting to 44 lakh, EPF amounting to Rs 11 lakh, Fixed deposit of 1.12 lakh, postal scheme of 1 lakh, gold of 1 lakh and equity investments are 30 lakhs, and he would retire after 15 years, still he believes that his financial goals are unmet. He wants to amass amount for child education and his marriage. What can he do? Going by the historical returns that SIP offers is 12-18%, but let's be conservative and take it to 12%, here's what a 10,000 monthly amount of SIP can do to your investments:

  • 5 year SIP of Rs 10000 monthly = Rs 8.5 lakh
  • 10 year SIP of Rs 10000 monthly = Rs 23 lakh
  • 15 year SIP of Rs 10000 monthly = Rs 50 lakh
  • 20 year SIP of Rs 10000 monthly = Rs 96 lakh
  • 25 year SIP of Rs 10000 monthly = Rs 1.79 crore
  • 30 year SIP of Rs 10000 monthly = Rs 3.24 crore

Calculations taken from

Adjust the amount- Now, that we all know inflation can take a toll of our money. Hence, taking the realistic rate of 6-8% calculate the amount
Future financial goal computation
This exercise will tell you how much amount you need to invest to meet the future goals.

How much return do you expect- Don't get overwhelmed by the returns of one year and think it will remain the same for the next year. A little homework is a must before getting into the mutual funds.

Use the PMT formula- This formula will help you to calculate how much corpus you need to invest.

PMT formula Image source:

The finances play an extremely crucial role while planning for the retirement, hence it is important to take into account different mutual fund schemes and above-mentioned factors.

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