EPF Calculator: Here's How Much You Need To Invest To Get Rs 2 Crore On Retirement

EPF Calculator: Retirement planning has become essential these days with the rising cost of living, medical expenses, and inflation. Generally, financial experts advise to plan investments early to build a sizeable corpus for your golden years. It's advisable to start investing in your 20s or 30s for retirement.

The retirement corpus should be enough to meet your monthly expenses after your service years and the amount should be decided taking into account your lifestyle and inflation rates. Building a retirement corpus of Rs 2 crore is not a difficult task. It can be achieved with little financial discipline and a long-term investment strategy.

While there are several retirement benefit schemes, the Employees' Provident Fund could be a suitable option if you are a salaried individual. The scheme is a government-backed savings plan designed for offering retirement benefits, including pension.

The Employees' Provident Fund Organisation, which functions under the Ministry of Labour and Employment, is responsible for managing the scheme.

An employee who has invested in the scheme can access the EPF corpus upon retirement or two months after resignation from a job, provided you are still unemployed. Generally, EPF interest rates are relatively higher than those of other traditional savings instruments. Being a government-backed retirement scheme, EPF savings are considered more secure compared to market-linked instruments.

The EPF scheme mandates a 12% contribution from the employee’s basic salary and dearness allowance every month. An equal amount is also contributed by the employer, of which 8.33% goes to the pension scheme, while 3.67% goes to the EPF account.

The EPF interest rate is decided by the government for every financial year. It currently stands at 8.25%.

Let's take a look at how much money you need to invest in the EPF scheme to build a retirement corpus of Rs 2 crore or more.

Let's assume 'A' is an employee, who starts contributing to EPF at the age of 25 years and has a salary of Rs 22,000 per month (Basic Pay+ DA). Additionally, let's assume that 'A' expects an average of 7% annual raise in his salary until retirement, which will be when he turns 60. Given these assumptions, 'A' will contribute 12% of his basic salary to the EPF account for the next 35 years.

The EPF contribution of 'A', at 12% of the basic salary and DA, amounts to Rs 2,640 per month. The employer also matches this contribution and 3.67% of this amount will be added to the employee's EPF account. This amounts to Rs 807.4 per month.

Based on this, let's calculate how the employee's EPF investments will grow:

• Employee's age: 25 years

• Service years: 35 years (until retirement, at age 60)

• Total monthly contribution: Rs 2,640 (employee) + Rs 807.4 (employer) = Rs 3,447.4

• Annual increment in salary: 7%

Over 35 years of this service, the employee would have accumulated a total investment of Rs 61,60,281. The total interest earned on this amount will be Rs 1,50,85,004. Therefore, the retirement corpus fund will rise to Rs 2,12,45,285, which is a little over Rs 2 crore.