EPF Calculation: How will a fund of 1.12 crore rupees be made by retirement on a salary of 25,000? Know the details

Employees Provident Fund (EPF) is the biggest and most reliable means for the working class to secure their future and lead a dignified life after retirement. If you think that it is necessary to have a salary of millions to build a multi-crore fund, then you are wrong. If an employee has a basic salary of Rs 25,000 per month and contributes to EPF regularly for 30 years, he can have a fund of more than Rs 1 crore at the time of retirement as per the current interest rate.

Regular savings will create a huge fund of Rs.1.12 crores

As per the calculation, if the PF is deducted continuously for 30 years on a basic salary of Rs.25,000 and the current 8.25% annual interest rate offered by EPFO ​​is maintained, the employee can accumulate around Rs.1.12 crore at the time of retirement.
In this whole process, the total investment from the employee and the company in 30 years will be approximately Rs.33.26 lakhs. Whereas against this only the interest earnings will be approximately Rs.78.49 lakhs. This figure shows that long-term investment earns interest more than double the principal amount.

How is PF calculated?

As per EPF rules, 12% of every employee’s basic salary and Dearness Allowance (DA) is deposited into his PF account every month. The same amount (12%) is also given by the employer i.e. the company. However, 8.33% of the company’s 12% contribution goes to the Employees Pension Scheme (EPS) and the remaining 3.67% is credited to the EPF account. The fund which is prepared by combining these two parts, earns compound interest every year.

Power of Compound Interest

The main reason behind the creation of this large fund is the ‘power of compounding’. The interest amount may appear low in the initial years, but as the years pass and the total balance of the account increases, the interest earned on the fund grows at a rocket pace. This is why experts advise that instead of withdrawing PF money while changing jobs, it should be transferred to the new company.

The actual fund may even exceed this

It is important to note here that this calculation of Rs.1.12 crore is based on the assumption that the salary remains constant for 30 years. But in real life the salary of an employee increases every year. As the basic salary increases, the PF contribution will also increase, which can increase the retirement fund to much more than Rs 1.12 crore. In addition, if an employee wishes, he can accumulate a larger fund by increasing his contribution through the Voluntary Provident Fund (VPF).
PF is not just a mandatory deduction, but it is the safest and most effective key to a happy retirement life.