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Why EPF Shouldn’t Be The Only Option To Secure Your Retirement?

Save more, saving over time to live a financially stable life after retirement is now a prerequisite with inflation and living costs going up. You need to prepare early and start saving, spending cash 25-30 years before your retirement to ensure that you maintain your lifestyle well after retirement, to make sure that you create a big retirement corpus. It takes time and continuity to build a massive retirement corpus. In order for the force of compounding to flourish for you and help you reach your target of a massive retirement portfolio, you need to accumulate regularly in long-term investment tools.

There are some long-term savings strategies that can help you plan for your future, such as EPF, PPF, NPS, and so on. The Employee Provident Fund (EPF) is the most common retirement-oriented contribution with tax-saving benefits for a lot of people. At the time, an interest rate of 8.5% is actually provided by the Employees Provident Fund Organisation (EPFO). Employees earning more than Rs 15,000 a month are not required to invest in the EPF, whereas those earning less than Rs 15,000 are required to make a necessary contribution to it.

In the context of the EPF, an individual is required to render a minimum contribution of 12% of his or her basic salary per month, which can be willingly raised under the VPF. The EPF comes under the EEE classification, ensuring the contribution, interest gained and the amount of maturity are tax-free. The balance of the EPF is tax-free from taxable interest and withdrawal accumulation for contributions of up to Rs 1.5 lakh pursuant to Section 80C. Although the EPF is a decent retirement investing instrument, it should not be the only retirement corpus investment vehicle since the EPFO invests most in debt instruments, meaning that the returns are never as large as those provided by equity investment schemes.

The contribution towards the EPF is 12% of your salary or 12% of Rs 15,000. (based on employer preference). This will prohibit you from making a limited contribution to your retirement target. The VPF choice might also not be given to you by several employers. One must also note that 8.33 percent of the employer’s contribution will be towards EPS, which won’t receive a single cent of interest. At the time of retirement from EPS, the benefit one receives is like a candy. Despite all these constraints and the way inflation is increasing, it may not be optimal to depend only on EPF for retirement saving. Most of the time, companies do not have an employee EPF service. You can also apply to a PPF (public Provident Fund) scheme if you are in a similar situation.

A blend of EPF and PPF is a nice beginning to create a large corpus for retirement. Since debt assets are PF items, their yields will not be enough to outpace inflation. So, you will need to hold equity securities that are proven to offer long-term, inflation-beating yields. In addition to PPF or EPF investments, whether you are a balanced or aggressive investor and have a strong risk profile, you should start investing actively in equity funds too. Your portfolio will have a mix of debt (EPF, VPF, PPF) and equity securities in this case (equity funds). If you have some years in front of you, this equity strategy will help you gain better returns over long stretches of time, so you can prosper from compounding your returns.    


Raman Sonu
Raman Sonu
Raman is an Author, writer and blogger. He has knowledge and understanding of finance, stock, and market research. He has done Bcom in Finance. Please contact me at for any feedback or concern.
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