Among the greatest retirement savings tools for employees is the Employees’ Provident Fund. It is the one single biggest investment vehicle that can ensure a comfortable retirement for anyone. Just a couple of things should be looked out for and that too in a timely manner to ensure the highest amount is created by the time retirement comes along. Among these crucial things is the fact that the sooner an employee starts his EPF journey, and the higher the starting salary, the better. It will bring the greatest of returns after the passing of years.
So, if we make a few general assumptions, the exact position can become crystal clear. Let us say an employee starts working in a company at the age of 19 years and the person is earning a salary of Rs 25000. The employee gets an annual increase in pay of 6%, which is a conservative amount and most manage to get much higher rates due to job changes and better performances. The employee’s contribution to EPF account is 12% and the employer contributes the same of which 3.67% goes into the EPF component. The EPF rate of interest we assume is 8.1%. The actual current EPF interest rate is 8.25%, but this is subject to change as per the wishes of the government.
If this employee keeps working non-stop and keeps contributing to his EPF account without withdrawing anything till retirement, he will get a massive nest egg to ensure a comfortable lifestyle for the rest of his life.
According to the EPF calculator, at the time of retirement, the employee will get a massive amount on maturity. This amount is a whopping Rs 3,58,38,452, according to the calculation.
What this individual can do thereafter is withdraw this money and, let us say, invest it in a bank fixed deposit, all that he needs to do then is sit back and relax and live just on the interest earned even as the principal amount from the EPF retirement corpus remains untouched. Yes, it is called ‘having your cake and eating it too’.
Disclaimer: These are just estimations and the exact sums will be mentioned in the EPF balance that can be checked in the EPF passbook.
EPF interest rate: An employee should take full advantage of the EPF tool. A basic salary of Rs 25000 can easily turn into over Rs 3 crore. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
