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Estimate the future value of your SIP when you increase your monthly contribution at regular intervals. See how a small annual step-up can substantially boost your final corpus.
Enter your starting SIP, expected return, tenure, and annual step-up
Fill in your starting SIP, expected return, tenure, and annual step-up to see the power of compounding with growing contributions.
SIP returns are market-linked. Past performance does not guarantee future returns.
Assumes compounding at the end of each month.
A Step-Up SIP calculator helps estimate the returns on your investment when you increase your SIP contribution at regular intervals, typically annually. Unlike a traditional SIP calculator, it accounts for your growing income and ability to save more.
The problem with the traditional calculator is that it assumes constant contribution throughout the life of your systematic investment plan (SIP). However, that is an unrealistic assumption. As you move ahead in your career, your income increases, and so does your power to spend and your ability to save for the future.
Obviously, as your income grows, it is essential to be able to gradually increase the SIP contribution also. The eventual impact on the SIP value is quite substantial.
A Step-Up SIP calculator helps you visualize the impact of increasing your SIP contributions over time. It allows you to see the difference in returns between a regular SIP and a step-up SIP. It determines the annual increase needed to reach a specific financial goal.
For example, you have a goal to create a corpus of ₹30 lakhs at the end of 10 years for your daughter's college education. Let's see how simple SIP and Step-Up SIP differ in their returns.
| Parameter | Regular SIP | Step-Up SIP |
|---|---|---|
| Monthly Saving | ₹10,000 | ₹10,000 |
| Time | 10 years | 10 years |
| Expected Return % (p.a.) | 12% | 12% |
| Annual Step-up % | 0% | 10% |
| Total Value | ₹23,23,391 | ₹33,74,326 |
As the Step-Up SIP calculator will quickly tell you, an annual step of just 10% ups your investment's worth by ₹10.51 lakhs.
The step-up SIP calculator estimates the future value of an investment by integrating factors like the initial investment, rate of return, compounding frequency, SIP duration, and periodic contribution increment.
Normally, you don't have to use the formula to calculate the step-up SIP since it is done automatically through the pre-designed calculator. However, from an analytical perspective, it is always useful to understand how this accretion happens in a step-up SIP.
Remember that a step-up SIP is essentially about increasing the SIP amount by a fixed percentage or by a fixed amount at the end of each year. In reality, it is much easier to focus on the simulation and the application of the step-up SIP calculator.
To make the power of compounding work for you, the rule is that the earlier you start, the better and more lucrative it is. The longer you invest via SIP, the more you earn returns, and the more your returns earn additional returns.
The first thing you must ensure in a step-up SIP is that you can handle the increase to support higher investments. If you want to see the benefits of SIPs, it is best to take a time horizon of 15 to 20 years to see the impact. In a step-up SIP, just as good performance gets magnified, even the bad performance gets magnified. Be very careful about escalating and continuing with the fund if performance is consistently bad.
Normally, most mutual funds put two conditions in the case of step-up SIP. The first condition is that you can only make one change in escalation in a year. Secondly, once you have committed to a certain SIP model, you can only change after the completion of the year. In case you want any changes to be made, then you must intimate the mutual fund house well in advance by giving them not less than one month notice about the intention to change.
Yes, you absolutely can do a step-up SIP in the equity linked savings schemes (ELSS), which is the tax saving scheme with a 3-year lock-in period.
Yes. In fact, shifting from regular SIPs to step-up SIPs is extremely simple. You only have to notify of your intention to switch and it will be executed. However, once you start a step-up SIP, you can only shift back to a regular SIP after the first year. You will have to apply to shift back to regular SIP not less than one month before the end of the SIP annual escalation tenure. However, these are long-term efforts, and you must be cautious about switching too often as it has unnecessary churn and transaction costs, apart from capital gains implications.
The whole idea of SIP and stepped-up SIP is to not worry about the timing of the market. In the long run, it is time and not timing that really helps in wealth creation. So, if you stick to the long-term steady discipline, you will automatically see the results.