Your disciplined investment in Employees’ Provident Fund (EPF) can create a massive retirement corpus. With Rs 5000 monthly contribution, along with salary hikes and 8.25% annual interest, your EPF savings can reach nearly Rs 3.5 crore by retirement.
Employees’ Provident Fund (EPF) is a retirement savings scheme, managed by the EPFO (Employees’ Provident Fund Organisation). Under this scheme, both the employee (12% of the basic pay) and the employer (3.67% of the employee’s basic pay) contribute. It is a mandatory contribution which automatically creates discipline. (Image: Facebook)
Furthermore, EPF also provides fixed interest from the government along with additional facilities like pension and insurance cover. (Image: Canva)
As per EPF rules, the employer deposits 12% of his basic salary in EPF and the employer also contributes the same. Among these, 8.33% goes to EPS and the remaining 3.67% comes into the EPF account. EPS provides the benefit of pension in future. (Image: Canva)
At present, 8.25% annual interest is being given by the government on EPFO. (Image: Canva)
Example: Suppose an employee’s monthly salary is Rs 64,000. Basic Pay is Rs 31,900, HRA is Rs 15,950 (50% of basic) and other allowances are Rs 16,150. (Image: Canva)
Calculation: 12% of basic pay = Rs 3,828 per month, 3.67% of basic pay = Rs 1.172 per month. Therefore, a total of Rs 5000 is deposited in the EPF account every month. (Image: Canva)
Assuming the salary will increase by at least 10% every year, the money going to EPF will also increase every year. It will also keep getting 8.25% interest continuously. (Image: Canva)
Hence, if a person starts the job at the age of 25 and makes regular contributions till the age of 58 (33 years), by the time of retirement, he/she will have a whopping retirement corpus of about Rs 3.5 crore. (Image: Canva)
During this period, the total money invested in the EPF comes to Rs 1.33 crore. (Image: Canva)
Currently, the minimum pension in EPS is fixed at Rs 1000 per month. However, the amount of pension depends on many factors, like pensionable salary and period of service. (Image: Canva)