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Calculate the required value of an SIP or monthly investments to reach a required target retirement amount

This calculator helps you calculate how much you need to invest per month for a given number of years and target growth rate in order to build a corpus or wealth that is sufficient to cover your expenses after retirement.

How to use this calculator

  1. Enter your current lifestyle costs or the cost of your desired lifestyle in today's value

  2. Enter a point of time in the future for which you want to calculate the future costs due to the effect of inflation

  3. Enter your expected yearly inflation rate

What does this required SIP calculator do?

This calculator is basically a modified SIP calculator. It helps you identify what monthly SIP is required in order to reach a given savings target for an assumed yearly growth rate. The growth rate may be constant, e.g. in a fixed deposit, or variable like in a stock or mutual fund investment. Depending market conditions, this growth rate may also be positive (you make money), 0 (you neither make nor lose money) or negative (you lose money). While calculating the required SIP value, we implicitly assume a cumulative average growth rate (CAGR). However, practically speaking, the growth rate in the real world is not uniform and may fluctuate over time.

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It is actually impossible to accurately predict the value of an SIP investment as this depends on the growth rate, when growth is positive, negative or 0, and for how long that growth rate applies. However, for investment planning purposes and to get an idea of the expected return on the investment, the value can be estimated with the help of a calculator under some assumptions.
 

How is the result calculated?

The calculation is done by using the formula to calculate the future value of an SIP over time solving for the required monthly investment amount. Since this is an SIP, there are two possible formulas, depending on whether the payment is made at the beginning or the end of a period. These formulas, along with an explanation of the  terms are provided above. Note: The formulas use the term "r/n" in some places. In my view, this a simplification to estimate the monthly growth rate based off the yearly growth rate. Over large periods of time and larger amount this would be noticeable. In a future iteration of this website, I may choose to provide the option for a more accurate calculation. This calculator currently uses just one formula (assuming payment is done at the start of a period) for practical purposes.

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For how many years do I need to do an SIP to reach a target amount of ₹5,00,00,000?

Assuming a growth rate of 10% and a target value at retirement (or target investment amount) of ₹5,00,00,000 here are some outcomes, i.e. required SIP value for different periods of time:

1.      5 years: ₹6,40,349 (Amount invested: ₹3,84,20,940)

2.      10 years: ₹2,42,069 (Amount invested: ₹2,90,48,280)

3.      15 years: ₹1,19,638 (Amount invested: ₹2,15,34,840)

4.      20 years: ₹65,299 (Amount invested: ₹13,05,980)

5.      30 years: ₹21,936 (Amount invested: ₹78,96,960)

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The above examples show not only how investing early can make a difference to investing, but also how compounding can work over time. In all cases, we achieve the same target investment amount of ₹5,00,00,000. However, depending on when the SIP investment begins, the amount of money that needs to be invested changes drastically. 

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Take-aways

  1. Starting early allows an investor to invest less to reach the same target

  2. Compounding effects over a larger duration of time are significant

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Why is this required SIP calculator special?

This required SIP calculator is special because it is very easy to use and is available online on a website that also hosts a whole bunch of other financial and investment related calculators which will make it easier for you to calculate whatever you need.

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Why is a required SIP calculator useful?

This required SIP calculator is useful as it can help with retirement planning monthly budgeting, or investment planning. It's also a good way for beginners and professionals alike to get a feel of the effects of compounding and to make better decisions.

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How do I use this required SIP calculator?

Instructions to use this required SIP amount calculator are provided above.

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Why should I use a calculator to find out the required SIP amount?

This calculator is easy to use and can help you save time as it directly calculate the SIP amount for a given target saving amount which would otherwise require manual, iterative changes if using a calculator that calculates the future value of an SIP. It can also help in retirement planning, wealth planning, investment planning and many other ways.

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