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Finance
Work out the monthly SIP needed to build a retirement corpus large enough to sustainably cover your inflation-adjusted living expenses using a safe withdrawal rate.
Three steps. First, today's monthly expenses are projected forward to your retirement year at your expected inflation rate, compounding once per year: inflated monthly expense = current monthly expense × (1 + inflation rate)^years to retirement. Second, that inflated monthly figure is annualized (× 12) and converted into a target corpus using your chosen safe withdrawal rate: corpus needed = annual expense at retirement ÷ (withdrawal rate ÷ 100). This is the 'safe withdrawal rate' or '4% rule' logic run in reverse — if a corpus can sustainably support withdrawing X% of itself per year, then the corpus that exactly covers one year of inflated expenses at that rate is annual expense ÷ X%. Third, that corpus becomes the target future value for a monthly SIP, solved the same way every goal-planning calculator on this platform solves for a required contribution: the level monthly amount whose monthly-compounding accumulation, at your expected investment return, reaches the target exactly at retirement. Assumptions: inflation and the withdrawal-rate conversion are simplifications of a genuinely complex retirement-drawdown problem (they don't model post-retirement investment returns, sequence-of-returns risk, or expenses that change shape in retirement); the investment return is held constant for the accumulation phase; and the result excludes taxes and fund charges.
It's the percentage of a retirement corpus you withdraw each year and (historically, in diversified-portfolio backtests) expect the corpus to sustain for a long retirement without running out. 4% is a widely-cited starting point, but it's a rule of thumb, not a guarantee — a lower withdrawal rate is more conservative and requires a larger corpus; a higher one is more aggressive and requires less.
No. This calculator only solves the accumulation phase — how much you need to save monthly to reach the target corpus. What happens during retirement (ongoing withdrawals against continued investment returns) is a separate question; see the SWP Calculator to model a corpus being drawn down over time.
Because prices rise between now and retirement. Sizing a corpus off today's ₹50,000/month expense would leave you short once you actually retire and that same lifestyle costs meaningfully more in future rupees — inflating the expense first keeps the target realistic.