Summary of this article
SIPs work best when aligned with clearly defined, inflation-adjusted goals—not as a standalone habit.
Long-term retirement needs demand diversification beyond mutual funds, including NPS and EPF.
Asset allocation and low scheme overlap are critical to manage risk and improve outcomes.
Regular reviews and continuity during market volatility are essential to avoid corpus shortfalls.
Systematic investment plans (SIPs) are a good starting point for young investors wanting to explore equity investments. By November 2025, SIP accounts in India surpassed 100 million, driven by growing awareness and easy apps. Their discipline, convenience, and long-term approach make them valuable for wealth creation.
Why SIPs May Be Insufficient For Retirement
Retirement is inevitable, and not optional like buying a car or a vacation. With India's life expectancy rising to around 72 years and climbing further, retirement can span 25–35 years, demanding a solid corpus for independence and dignity.
Yet, many investors fail to realise that SIPs alone are insufficient for critical goals, such as retirement. Inflation, market volatility, and poor asset allocation can derail plans, turning sole reliance on SIPs into a dangerous risk.
Says Anshi Shrivastava, head-personal finance Training at 1 Finance, a financial planning firm: “Awareness exists, but preparedness is critically low. A recent survey by Axis Max Life Insurance reveals that only 37 per cent have built at least 25 per cent of their target corpus, while 63 per cent of urban Indians fear their savings will deplete in just 10 years post-retirement. Too often, retirees become "house rich but cash poor," owning property yet lacking liquid funds.”
Tragically, depleted savings - often from healthcare - have left some middle-class seniors facing abandonment. These figures highlight the importance of having comprehensive wealth creation strategies, rather than relying solely on SIPs. Without goal-sizing, inflation adjustments, diversification, and tools like insurance or National Pension System (NPS), steady SIPs can leave investors vulnerable.
The Missing Gaps
Here are a few things to keep in mind to avoid these possible vulnerabilities.
Those with steady incomes often rely on SIPs to build a retirement corpus through periodic investments in mutual funds. It encourages disciplined and gradual saving.
However, the reality is different.
Says Shrivastava: “While SIPs appear ideal on paper, many investors in real life situations fail to achieve their target corpus. According to data from the Securities and Exchange Board of India (Sebi) for FY 2022–23, 73 per cent of mutual fund units were redeemed within two years of investment, while only 3 per cent were held for more than five years. Here instruments, such as Employees’ Provident Fund (EPF) and NPS come in handy. Initially, the long lock-in periods and strict withdrawal rules of the NPS have discouraged many investors from participating.”
Benefits of NPS
Yet, these very restrictions are what make NPS effective for retirement planning: they promote disciplined, long-term savings and help ensure a substantial corpus accumulates to cover expenses once regular income stops.
Additionally, to address liquidity concerns, the Pension Fund Regulatory and Development Authority (PFRDA) implemented key reforms in December 2025. These include eliminating the 5-year lock-in for premature exits and increasing the allowable lump-sum withdrawal at normal exit to up to 80 per cent (from the previous 60 per cent), with only 20 per cent required for annuities. These changes enhance flexibility while preserving NPS's core strength as a dedicated retirement vehicle.
“Integrating NPS can boost equity exposure for higher growth, while EPF offers reliable stability. Making use of these government retirement schemes, in addition to SIPs in mutual funds, can improve one’s financial wellbeing during retirement,” says Shrivastava.
Second, the asset allocation mix plays a crucial role in achieving goals. Diversification matters: avoid investing everything in one category and build a balanced portfolio with a mix of asset classes (equity, debt, hybrid, etc.). Also, ensure minimal overlap between schemes to reduce unnecessary risk and improve overall returns. Instead of investing in as many schemes as possible, the focus should be on investing in schemes that don’t overlap, for true diversification.
Finally, “align fund selection with specific goals and invest with intention. Choose funds that match your exact goals and invest with a clear purpose. This alignment is crucial because mismatched funds can fall short on growth, risk, or timing, leaving the investor vulnerable at the time of need. Intentional investing turns your efforts into real, reliable progress toward financial security,” adds Shrivastava.
In conclusion, SIPs shine for long-term wealth creation, but fall short without a holistic strategy that integrates traditional pillars like NPS and EPF for stability and tax efficiency. Critically, many overlook soaring healthcare inflation and the rising costs of old-age care, alongside common pitfalls like poor asset allocation, inadequate investment amounts, or discontinuing SIPs during market dips.
True financial security, when planning for life's big milestones, requires more than just routine investments. It calls for clearly-defined goals, diversified portfolios, regular reviews, and proactive planning.
Investors should pause and ask themselves honestly: Are my monthly SIPs truly aligned with my real-life needs and dreams, or have they become just a comforting habit? And for greater clarity and confidence, consulting a qualified financial advisor is always the best step forward.
