EPF: What Monthly Contribution Of Rs 5,000 And Rs 1 Lakh Give You On Retirement
Premature withdrawals reduce the final corpus, while consistent contributions over decades maximise returns.
The Employees' Provident Fund is a popular retirement savings scheme for salaried employees. Contributions to the scheme made during one’s working years, along with accumulated interest, help build a corpus for post-retirement financial security.
But how much can a disciplined EPF investment of Rs 5,000 or Rs 1 lakh per month grow over time?
The EPF is managed by the Employees’ Provident Fund Organisation and offers a fixed interest rate, which is reviewed annually. As of now, the interest rate offered in the scheme stands at 8.25% per annum. Contributions are compounded monthly, meaning returns grow exponentially over time.
Assuming a working tenure of 30 years, here’s how the EPF corpus would grow at 8.25% interest per annum:
Scenario 1: Rs 5,000 Contribution
Monthly deposit: Rs 5,000.
Tenure: 30 years.
Interest rate: 8.25%.
Corpus at retirement: Rs 77.04 lakh approximately.
Even a modest monthly contribution of Rs 5,000 can result in around Rs 77 lakh at retirement, thanks to compounding interest.
Scenario 2: Rs 1 Lakh Contribution
Monthly deposit: Rs 1 lakh.
Tenure: 30 years.
Interest rate: 8.25%.
Corpus at retirement: Rs 15.41 crore approximately.
A higher contribution of Rs 1 lakh per month can lead to an astonishing Rs 15.4-crore corpus.
Factors That Affect EPF Growth
Contribution Duration: The longer you contribute, the greater the power of compounding.
Interest Rate Fluctuations: EPF rates change annually, affecting long-term returns.
Employer Contribution: Employers also contribute to EPF, increasing the total accumulation.
Withdrawals And Transfers: Premature withdrawals reduce the final corpus, while consistent contributions over decades maximise returns.
Maximising EPF Benefits For Retirement
Avoid premature withdrawals to keep the compounding effect intact.
Increase contributions when possible as a higher deposit significantly impacts the final corpus.
Monitor EPF interest rates and government policy changes to plan better.
Use Voluntary Provident Fund to invest beyond the mandatory contribution limit and boost savings.
