The whole calculation is three lines of algebra. No black box.
- Future expenses = today's expenses × (1 + i)^n, where i is inflation and n is years to retirement.
- Corpus = annual expenses at retirement, funded over the retirement years at the real return, where real return g = (1 + r) / (1 + i) − 1. Withdrawals are taken at the start of each year.
- SIP = corpus × r / ((1 + r)^n − 1), where r is the monthly rate (annual rate ÷ 12) and n is the number of months.
The real-return step is the part most spreadsheets get wrong. Once you retire, your corpus earns 7% but your spending grows 6%, so the useful growth is only about 0.94% a year. That is why the corpus is so large.
Worked example: age 30, ₹60,000 a month
Step 1: inflate the expenses
1.06^30 = 5.7435. So ₹60,000 × 5.7435 = ₹3,44,609 a month at age 60. Annual spending is ₹3,44,609 × 12 = ₹41,35,314 (about ₹41.35 lakh).
Step 2: size the corpus
Real return g = 1.07 / 1.06 − 1 = 0.9434%. Funding 25 years of inflation-adjusted withdrawals, taken at the start of each year, takes a corpus of about 22.39 times the first year's spending:
₹41,35,314 × 22.39 = ₹9,25,78,174, or about ₹9.26 crore.
That corpus spends down to zero at age 85. Run the loop yourself: withdraw ₹41.35 lakh, grow the balance at the real return, repeat 25 times. The balance lands at nearly zero on the last pass.
Step 3: find the SIP
Monthly rate r = 12% ÷ 12 = 1%. Months n = 360. (1.01)^360 = 35.95.
SIP = ₹9,25,78,174 × 0.01 / (35.95 − 1) = ₹26,489 a month.
Two honest caveats. First, dividing 12% by 12 is the convention most calculators use. If 12% is an effective annual return, the monthly rate is 0.949% and the SIP rises to about ₹30,048. Second, a flat SIP for 30 years is unrealistic. If you raise the SIP 10% each year, you can start at about ₹10,584 a month and still reach the same corpus. Salaries rise, so a step-up SIP is the more natural plan.
EPF, NPS and PPF as the base
Do not treat the ₹9.26 crore as a number your SIP alone must produce. Three government-backed products already do part of the job, and a retirement calculator India salaried workers use should subtract them before sizing the SIP.
EPF
The Employees' Provident Fund is run by the Employees' Provident Fund Organisation[2]. It is compulsory for many salaried employees, it compounds with no effort from you, and it is the one retirement asset almost everyone in the formal sector already owns. Check your passbook on the EPFO member portal and use the actual balance in your plan.
NPS
The National Pension System is regulated by PFRDA, with scheme information published by NPS Trust[3]. It lets you choose an equity and debt mix, and part of the corpus at exit must buy an annuity, so not all of it is cash you can draw freely. Confirm the current exit rules on the NPS Trust site before you plan around a lump sum. Voluntary contributions can earn an extra deduction under section 80CCD(1B) for those who choose the old tax regime[4]. Compare that against the new regime with the income tax calculator before committing.
PPF
The Public Provident Fund is the debt anchor. It will not beat equity over 30 years, but it does not fall 30% in a bad year, and that matters in the five years around retirement. Treat it as the part of your portfolio you are happy to hold through a crash.
A practical split: let EPF and NPS cover the baseline, use PPF for stability, and put the rest of the SIP into a diversified equity index fund. To test how much a monthly SIP grows on its own, the SIP calculator gives you the year-by-year path.
Withdrawal rate: why 4% does not map
The 4% rule says you can withdraw 4% of your starting portfolio in year one, raise it by inflation every year, and the money should last 30 years. It was built on US returns and US inflation.
In India the gap between what your debt earns and what prices do is thinner. In the worked example, 7% nominal against 6% inflation leaves a real return under 1%. At that real return, a 4.47% starting withdrawal empties the account in 25 years. That is exactly the example above.
Those durations assume a real return of 0.94%. If you keep a meaningful equity share after 60, your real return is higher and the corpus lasts longer. If inflation runs near the top of the RBI band[1] for years, it lasts shorter. Pick 3% to 3.5% if you retire early or expect to live past 85. Pick the 25-year number only if you have a pension or other income behind it.
Common mistakes
- Ignoring inflation. Planning for ₹60,000 a month in 2056 rupees when you need ₹3.45 lakh is the single most common error.
- Using salary instead of spending. Retirement funds your lifestyle, not your old CTC.
- Counting the house. Your home is a cost you avoid, not income you receive. Selling it means renting or buying another.
- Underbudgeting healthcare. Medical costs tend to climb faster than general prices and concentrate in the last decade. Keep a separate health cover and a medical reserve.
- Assuming 12% forever. Equity returns arrive unevenly. A 30-year average hides a 40% drawdown in year 29.
- Retiring the SIP at 60 with all-equity money. A crash in your first retirement years does the most damage. Shift towards debt gradually from about 55.
- Setting it once. Rerun the numbers every year after your salary review.
Run the WOWHOW retirement calculator when you start a plan, when you get a raise, and when your spending changes. Change one input at a time. Move retirement age first, then inflation, then returns, and watch how the SIP changes. If the SIP looks unaffordable, the fastest levers are a later retirement age and a step-up SIP, not a higher return assumption.
If you also file taxes yourself, the income tax filing checklist for 2026-27 keeps your NPS and 80C records in one place. For the monthly budgeting side that feeds the SIP, see the personal finance autopilot prompt pack. If you freelance, read the freelancer accounting guide, since you have no EPF and need a larger voluntary SIP.
Sources
- Reserve Bank of India, Monetary Policy Framework: 4% CPI inflation target with a 2% to 6% tolerance band (accessed 13 October 2026)
- Employees' Provident Fund Organisation, official site (accessed 13 October 2026)
- NPS Trust, official site (accessed 13 October 2026)
- Income Tax Department, deductions under Chapter VI-A including section 80CCD(1B) (accessed 13 October 2026)
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a qualified professional for guidance specific to your situation.
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