How much SIP is required to accumulate ₹7 to ₹8 Cr in 20 years for retirement?
3 min read 26 Mar 2023, 07:56 PM ISTSIP refers to Systematic Investment Plan, which is a form of investment strategy that enables investors to invest a specified amount of money in a mutual fund scheme at regular intervals, typically on a monthly basis.
PremiumSIP refers to "Systematic Investment Plan" which is a form of investment strategy that enables investors to invest a specified amount of money in a mutual fund scheme at regular intervals, typically on a monthly basis. The invested amount is utilised to acquire units in the mutual fund at the current market price, and because the investment is done on a regular basis, the benefit of rupee-cost averaging can be taken by the investors. SIPs are a popular investment choice among individuals who want to invest in mutual funds without having to deposit a large chunk of money all at once. Considering mutual funds are a long-term investment, we've used an example of how much SIP is needed to accumulate ₹7 to ₹8 Cr in 20 years for retirement. Let's take opinions from our different industry experts.
Aniruddha Bose, Chief Business Officer, FinEdge
Retirement Planning is a long-range goal - with a long accumulation stage and an equally long deployment phase. Due to this dynamic, it tends to blindside a lot of investors who end up assigning themselves arbitrary retirement targets such as 1 Crore or 5 Crores.
The correct way to plan for your retirement is to speak with an advisor and arrive at a reasonable estimate of your monthly spending in your first year of retirement; and then do the math keeping variables such as life expectancy, post-retirement returns, inflation and current provisioning from other sources such as PF in mind. Most likely, the outcome of the above exercise will prove surprising and eye-opening!
For instance - if you’re a 40-year-old looking to retire with 8 Crores in 20 years, your corpus will buy you a post-retirement lifestyle of the equivalent of around Rs. 1 Lakh/month in today’s terms, because your expenses in the first month of your retirement will actually inflate to around 3.2 Lakhs by the time you retire.
Since 20 years is a very long time horizon, you have time on your side. Take measured risks by investing into small and mid-cap-oriented funds that are long term compounders. However, make sure you fully understand the risks involved before you invest. If the volatility of small and mid-caps worries you too much, you could opt for a flexi cap fund too; but anything lower than that in risk would mean you’re not doing justice to the 20 year time horizon. Assuming long term returns of 13-14%, you would need to invest around Rs. 60,000 per month through SIP’s to meet your target.
If a SIP of Rs. 60,000 seems high, you could go for a step up plan instead. By starting off with half that amount and stepping it up by Rs. 6,000 a year, you could achieve your Rs. 8 Crore retirement target too, assuming a 14% CAGR from a high-risk fund. This is a clear example of the power of discipline and regular SIP step ups and how it can help you plan a fantastic retirement!
Satyen Kothari, the founder and CEO of Cube Wealth
While returns vary based on many factors an estimated ₹80,000/month SIP over a 20-year period should give you between ₹7- ₹8 Cr assuming 12% returns. However, one should diversify across assets and not rely on mutual funds alone for their retirement corpus.
Disclaimer: The inputs are based on an assumption of 12% which is not guaranteed
Gurleen Kaur Tikku, Certified Financial Planner of Hareepatti
It actually depends on the risk-taking appetite of the investor. If the investor has a high risk-taking appetite, then they can invest in Equity mutual funds with expected returns @13%, SIP requirement will be Rs. 75000 per month to create a corpus of 7.78 Crores.
Someone who has a medium risk-taking appetite can expect 10% returns and the SIP requirement will be Rs.100000 per month to create a corpus of Rs. 7.23 Crores
Someone with a low risk-taking appetite can expect 7% returns and the SIP requirement will be Rs.130000 per month to create a corpus of Rs. 7.44 Crores.
