The early bird always gets the worm. This applies to almost every facet of life and spans even the Employees’ Provident Fund Organisation (EPFO). Notably, most people get employed in an establishment that offers EPF facility to its employees at around 25. However, if an individual manages to get himself enrolled in the EPF at around 21 years of age or even earlier, he or she will get magnificent returns on retirement that will run into crores. Notably, apart from starting at a very young age, the EPF interest rate of 8.25%, together with the magic of compounding can deliver some magnificent returns for the subscriber that run into crores of rupees.
The basic back-of-the-envelope calculation will show you how much there is for this individual to gain. However, certain assumptions will be there to provide a better fit for the public at large. Let us say that this individual gets to start his EPF journey at the age of just 21. His basic salary is Rs 20000 and he works non-stop till retirement without any loss of job. This person also never makes any withdrawals from his EPF account for any emergencies or any other purposes. EPF withdrawals can ruin retirement for the employee, these are that dangerous.
Feeding all this information into the EPF calculator shows the magnificent result. Starting age is 21, retirement age is 58, basic monthly salary is Rs 20000, the annual increase in salary expected is 6%, and the contribution to EPF every month is 12%, backed by 3.67% by the employer and finally, EPF interest rate of 8.25%, and putting it all together will create a magnificent sum of Rs 2,36,09,948 for the investor after 37 years of service!
Note: These are simply estimations as there are a number of variables at play. The correct amounts will be mentioned in the EPF passbook of the employee.
The earlier in their career employees take advantage of the current EPF interest rate of 8.25%, the more they will earn. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
