SIP vs EPF vs NPS Calculator: Which can create highest retirement corpus on monthly contribution of Rs 11,000? Know here
SIP vs NPS vs EPF Calculator: Retirement planning is an important aspect for an individual to achieve financial freedom. There are many investment schemes such as National Pension System (NPS), Employees' Provident Fund (EPF) and Systematic Investment Plan (SIP) in mutual funds for retirement planning. Two of them provide tax-free maturity amount.
EPF vs NPS vs SIP Calculator, Retirement Planning: If we think about future financial planning, we think about expenses such as buying a home, child education, marriage, or travelling abroad. While investment for achieving these goals is necessary, investment for retirement planning is also equally important. Retirement is a stage where you don't need to earn money actively, where you have resources for passive income, which can help you run your daily expenses easily. There are many retirement schemes that help you create a sizeable retirement corpus in the long run. Employees' Provident Fund (EPF), National Pension System (NPS), and Systematic Investment Plan (SIP) are a few of them. EPF and SIP allow monthly investment, while in PPF, one can invest monthly or in phases in a financial year. Here, we take you through the basics of all 3 schemes and tell you what a Rs 11,000 monthly investment in each scheme can do to help create a retirement corpus in 30 years.
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(Disclaimer: This is not investment advice. Do your due diligence or consult an expert for retirement planning.)
NPS
National Pension System (NPS) is a prominent retirement scheme that is open to all Indians. The scheme launched in 2004 for central government employees was opened to all in 2009. The special thing about NPS is that it is a market-linked scheme, where the NPS account holder can choose equity exposure up to 75 per cent based on their age and the risk appetite. They can contribute through monthly SIP or in phases in a financial year.
NPS
They can invest from 18 to 75 years of age. But at 60, they get the option to withdraw up to 60 per cent of their retirement corpus. The remaining 40 per cent amount is used to purchase an annuity plan. The account holder gets the return from this investment in the form of a monthly pension. If they want, they can purchase annuity from 100 per cent of their corpus. The maturity amount is tax-free.
EPF
This is a retirement scheme for private sector employees. Here, they make a monthly contribution and get a fixed compound interest rate on it. The minimum basic salary to have an EPF account is Rs 15,000. The minimum monthly EPF contribution is Rs 1,800. The maximum contribution is 12 per cent of the basic pay and dearness allowance (DA) of an employee.
EPF
The current interest rate in EPF is 8.25 per cent, which is subject to change. The striking thing about this scheme is that the employer also contributes an equal amount to the EPF account of an employee. EPF subscribers can invest till the age of 60, while they can withdraw the corpus at 58 years of age or under specific conditions. The maturity amount is tax-free.
SIP
It is a method of investing in mutual funds. It allows an investor to invent daily, weekly, monthly, quarterly, half-yearly, or annually. The outstanding thing about SIP investment is that many mutual funds allow a monthly SIP as small as Rs 100. The majority of mutual funds allow a Rs 500 minimum monthly SIP. It helps investors with a small monthly amount to invest. They can opt for a step up SIP, where they can increase their SIP amount every year, keeping pace with their increased income.
SIP
They can stop or restart SIP after informing the mutual fund house. SIP investment provides rupee cost averaging, where investors purchase net asset value (NAV) at different prices at every investment cycle. In the long run, the rupee cost averaging decreases the chances of getting negative returns to minimal. SIP investment in the long run can turn out to be an effective tool to build a large retirement corpus.
SIP vs EPF vs NPS: Retirement corpus from Rs 11,000 monthly contribution to EPF
At Rs 11,000 contribution a month, the investment in 30 years will be Rs 39,60,000.
At a 8.25 per cent interest rate, the estimated retirement corpus on this investment will be Rs 1,69,48,351.27.
SIP vs EPF vs NPS: Retirement corpus from Rs 11,000 monthly contribution to NPS
Pension Fund Regulatory and Development Authority's (PFRDA) assumptions for NPS return on selecting 75 per cent equity and 25 per cent government securities for investment are 12.86 per cent. If we reduce the equity exposure, the return can be less. But we are calculating at 12.86 per cent annualised return.
In 30 years, the estimated retirement corpus will be Rs 4,71,08,117, of which Rs 4,31,48,117 will be estimated gains.
SIP vs EPF vs NPS: Retirement corpus from Rs 11,000 monthly contribution to SIP (at 10% return)
Since SIP returns are not fixed. They may vary in the short and long run. We are taking 10 per cent, 12 per cent, and 14 per cent as standard annualised returns.
At 10 per cent annualised returns, a Rs 11,000 monthly SIP investment will fetch estimated Rs 2,11,12,579 as long term capital gains and estimated Rs 2,50,72,579 as the estimated retirement corpus.
SIP vs EPF vs NPS: Retirement corpus from Rs 11,000 monthly contribution to SIP (at 12% return)
At 12 per cent annualised growth, estimated capital gains will be Rs 3,48,69,052 and the estimated retirement corpus will be Rs 3,88,029,052.
SIP vs EPF vs NPS: Retirement corpus from Rs 11,000 monthly contribution to SIP (at 14% return)
At 14 per cent annualised return, estimated capital gains will be Rs 5,71,67,612 and the estimated retirement corpus will be Rs 6,11,27,612.