If you are a working person, then this question must have come in your mind at some time or the other, is EPF or mutual fund better for retirement? While on one hand many people believe that investing in mutual funds for a long time can give high returns, on the other hand some people consider EPF to be the safest and surest investment. To solve this big confusion of common people, Employees Provident Fund Organization (EPFO) has released a special video. In this video, EPFO has made a detailed comparison of returns, tax, pension, risk, insurance and other facilities between EPF and mutual funds.
EPF is necessary, whereas mutual fund is completely your choice.
According to EPFO rules, EPF is a mandatory government social security scheme. It is absolutely necessary for employees and companies on whom EPF law is applicable to join this scheme. In this, along with the employee, the company also contributes its part every month. On the contrary, whether to invest in mutual funds or not depends entirely on your own choice. Whether to invest money in this or not is entirely an investor’s personal decision.
The company also gives money for your savings in EPF.
The biggest and special thing about EPF is that not only the employee alone saves money, but the company also contributes up to 12 percent of the employee’s basic salary. Due to this, the employee’s retirement savings start increasing very rapidly. On the other hand, if you invest in a mutual fund, then not a single rupee is given by the company. Only the amount of money you invest yourself will be deposited in your account.
There is a huge difference between the two in terms of returns.
The returns from mutual funds completely depend on the ups and downs of the stock market and its performance. If the stock market does very well, you can get great profits on your investment, but if the market falls, you may have to suffer a big loss. That means there is always financial risk in it. On the contrary, the government itself sets a fixed interest rate on EPF every year, hence the returns received in it are considered completely stable and safe.
There is a big benefit on the tax front also
According to EPFO, the amount deposited in the EPF account, the interest received on it and the entire amount withdrawn within the limits of the rules are completely tax-free. In comparison, if you earn profits from mutual funds, you may have to pay capital gains tax. This amount of tax completely depends on what type of fund you have invested your money in and for how long.
EPF gives excellent pension and life insurance benefits.
EPF is not just a simple scheme to save money. Along with this, employees also get tremendous facilities like insurance and pension. After completion of retirement age, eligible employees continue to receive pension continuously throughout their life. Apart from this, if unfortunately an EPF member dies, his family gets a huge life insurance amount of up to Rs 7 lakh along with the pension. On the other hand, no such facility is available in mutual funds. On the death of the investor, only the then current market value of his investment is available to his nominee.
Strict rules for closing account and withdrawing money
The main objective of EPF is to make long-term savings for retirement, which is why you cannot close it whenever you want. On the contrary, in mutual funds you have complete freedom that you can sell your investment and exit the fund whenever you want.
After all, which option is best for you?
If your main goal is to create safe and secure savings for retirement, then EPF proves to be a very strong option. In this, many excellent facilities are available like huge contribution of the company, government guaranteed interest, tax exemption, pension and life insurance. On the other hand, if you are willing to take the market risk in order to earn slightly higher returns, then equity mutual funds can offer you great earning opportunities in the long run, although there is always a risk of market fluctuations. Many financial experts in the market believe that for a better and stronger retirement planning, many people make a balanced use of both EPF and mutual funds, so that they can get the strong benefits of both security and better returns.
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