How Much Should I Invest?

While having a conversation with one of my friends, it occurred to me that the current calculators are not sufficient to figure out how much to invest per month while increasing the SIP every year to meet your retirement goal. Lets say, you have an age in mind at which point you want to retire. And you want to know how much you should invest every month of every year until you reach your goal. Throw in a twist, which is that you want to increase your investment every year by some fixed percent. There is no calculator on this blog that will tell you how much you should invest every month. Naturally I thought there should be one, and here is that calculator. Hope it helps you reach your goal. Here are some instructions on how to use it.

Monthly Expenses in Retirement

Write down your anticipated monthly expenses in today’s value after you retire. Note that your retirement expenses may be different from your current expenses. For example, hopefully you have paid your home loan and probably don’t need to service it. May be your kids will be on their own by the time you retire and you don’t have to foot their education bills, etc. Add in any expenses you expect to incur in retirement like vacations etc. For example if you want to take 2 vacations per year and each is expected to cost Rs. 60,000, then, per year that is Rs. 1,20,000. Divide that by 12 and add it to your general expenses per month. Also deduct from expenses any income you might be receiving once you retire, for example house rent from a second house that you own.

Current Investment

If you already have some investments that are going to give good returns like equity then plug in that number here. You can enter 0 if you don’t have any savings yet, or don’t want to include that as part of your early retirement corpus. You can include any real estate that you own and can sell when you retire.

Your age

You know what to do.

Anticipated retirement age

When you intend to retire.

SIP Increment

The rate at which you want to increase your investment every year. For example today, may be you can invest Rs. 50,000 per month. But you do also get a raise every year most times. So typically you should be able to save and invest more every year. Given what your career path has been and what you imagine it might be in the future, you can enter some number here. If you have been getting 10% increments in the past few years and you expect it to continue, enter 10%. Always aim to invest more than what you invested the previous year.


In the past, inflation has been on the higher side in India. But thanks to the RBI’s inflation mandate, it is trying its best to keep the retail inflation at 4% with a 2% tolerance. Hopefully the future governments and RBI will continue to target it, in which case the upper limit for inflation will be 6%. Do note however that this inflation is CPI (Consumer Price Index) based and is just the inflation of a basket of consumer goods and services purchased by households. Your real inflation may be higher or lower. For example, health and educational inflation is higher than food inflation, so if you have more expenses there, then obviously your inflation will be higher.

I would suggest that you use 6% as inflation, but if you want to be more conservative, go for 7% or even 8%. If on the other hand, you are in good health and can maintain it that way, have no educational expenses to bear and will live a minimalist life in your retirement then you can try 5% or 4%. Although I wouldn’t suggest either of those extremes (4% and 8%).

Withdrawal Rate (Example 4% rule)

You can use one of the withdrawal rule that you feel comfortable with. The default 4% rule is a good conservative number. If you want to be even more conservative, go for 3% or even 2%. On the other hand if you fell like you can live like a monk for the rest of the life you can use 5% or 6%.

Investment return

What investment returns do you expect in your retirement. Note that you cannot invest all your corpus in a very volatile small cap mutual fund. Most likely you have some good allocation to debt funds and some equity exposure to beat the inflation. So 10% should be a good number to aim for. If you want to be conservative, go for 9% or even 8%. Finally, if you are a habitual gambler or buy lotteries, try something higher like 12%.

How Much Should I Invest Calculator

Monthly expenses
Current investments
Your age
Anticipated retirement age
SIP increment rate
Withdrawal rate (example 4% rule)
Investment return
Monthly expenses when you retire
You will need this big of a corpus
Start monthly SIP with this amount

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2 thoughts on “How Much Should I Invest?”

  1. Your calculator ‘How Much Should I Invest Calculator’ is not completely correct.

    Keeping all things constant, when I try to reduce my retirement age, instead if increasing the corpus required the calculator gives a reduced amount.

    1. While it seems counter intuitive, that is how it is supposed to work :). Let me explain with an example. Lets say your expenses for retirement in today’s terms is Rs. 50 k/month and current investments are 0. Your age is 40 and retirement age is 60. Then by the time you retire, your expenses per month will be Rs. 1.60 lakhs/month assuming 6% inflation [1]. If you use a 4% withdrawal rate then you need a corpus of Rs. 4.80 crores (Rs. 1.60 * 12 / 0.04) when you turn 60.

      Now try the same experiment but only change retirement age to 50 instead of 60. Then retirement expenses will be Rs. 90 k/month. So you need a corpus of Rs. 2.70 crores (Rs. 90000 * 12 / 0.04) when you turn 50 (not now).

      Obviously corpus will need to be lower at 50 years than 60 years, because the corpus will keep growing. So the corpus of Rs. 2.70 crore will grow to Rs. 4.8 crore by the time you reach 60 just like in the first example. That is the time value of money [1].

      I can understand why you think there should be more for 50 than 60 because you are thinking the money should last until you die and at 50 you have more years before death than 60. But that is not how investing works. If you really want to understand how long your money will last use the
      How Long Will My Money Last? [2] calculator.


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