EPF Calculation: Retirement Planning: If you keep contributing to EPF from the beginning, then you can create a strong fund for a comfortable life at the time of retirement. If an employee starts a job at the age of 25 and contributes continuously to EPF for 58 years, then his account can become a gold mine on retirement.
EPF Calculation: EPF i.e. Employer Provident Fund is considered to be the most reliable and safe option for those planning for retirement. If an employee puts just Rs 5,000 a month in EPF, then it can gradually grow to a fund of about Rs 3.5 crore by retirement. It not only provides government guarantee, but also adds the benefit of pension.
If you are also planning for retirement, then know here how you can create a fund of about Rs 3.5 crore with just Rs 5,000…
What is EPF?
EPF (Employees Provident Fund) is a retirement saving scheme managed by EPFO. In this, the employee deposits 12% of his basic salary. The employer also contributes the same amount, but 8.33% of this goes to EPS (Employees’ Pension Scheme) and 3.67% comes into the EPF account. EPS provides the benefit of pension in the future.
How much is the contribution?
Suppose someone’s salary is Rs 64,000 per month. In this, the basic salary is Rs 31,900, HRA is Rs 15,950 and the remaining allowances are Rs 16,150. Now 12% of the basic i.e. Rs 3,828 of the employee goes to EPF. The employer’s 3.67% i.e. Rs 1,172 also gets added to EPF. That means a total of Rs 5,000 is being deposited in the EPF account every month.
Long term benefit
If an employee starts working at the age of 25 and continuously contributes to EPF for 58 years, then his account can become a gold mine on retirement. Assuming a salary growth of at least 10% every year, the amount deposited in EPF also increases every year. The government currently gives 8.25% annual interest on this.
The result is that after 33 years, i.e. at the time of retirement, he will have a fund of about Rs 3.5 crore. In this, his total deposit amount will be around Rs 1.33 crore and the rest will be made from interest.
Benefit of EPS
8.33% of the employer goes to EPS, which entitles him to pension. Currently, the minimum pension in EPS is fixed at Rs 1,000 per month. The actual pension will depend on your pensionable salary and service period.
Why is EPF safe?
- It is completely guaranteed by the government.
- Market fluctuations do not affect it.
- The interest rate may change but the money remains safe.
- Along with this, you also get the benefit of pension and insurance.
That is, if you keep contributing to EPF from the beginning, you can create a strong fund for a comfortable life at the time of retirement. Starting from just Rs 5,000 per month, this amount can reach crores and you will also get pension.
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