Investment in guaranteed return options such as Public Provident Fund (PPF) can also help you create a retirement corpus of more than Rs 1 crore. And that too, even if you start investing at the age of 30. Whether you invest Rs 12,500 a month in PPF or just Rs 7500, you can create a corpus of more than Rs 1 crore. However, the only condition is that you have to be steady and regular in your investing.
PPF: When you think of investment schemes offering guaranteed returns, you think of options that can give you steady returns, keep you away from market risks, and help you achieve financial freedom in the long run. A large retirement corpus running into crores is the last thing that you expect from guaranteed return options. But that’s not the case. Investment in guaranteed return options such as Public Provident Fund (PPF) can also help you create a retirement corpus of more than Rs 1 crore. And that too, even if you start investing at the age of 30. Whether you invest Rs 12,500 a month in PPF or just Rs 7500, you can create a corpus of more than Rs 1 crore. However, the only condition is that you have to be steady and regular in your investing. In our calculations, we will tell you how it is possible to create an over Rs 1 crore retirement corpus through PPF investment. But before that, we take you through some of the features of PPF.
PPF: Minimum/maximum investment
The minimum investment in a PPF account is Rs 500, while the maximum limit is Rs 1.50 lakh in a financial year. The amount can be deposited as a lump sum or in any number of installments in multiple of Rs 50.
PPF: Maturity period
PPF comes with a maturity period of 15 years, where one has to invest for 15 years in a row to continue their account.
After 15 years, one can either withdraw the entire amount after submitting account closure documents or continue for further blocks of 5 years and so on (within one years of maturity).
The account can also be closed prematurely after 5 years from the end of the year in which it was opened.
PPF: Interest Rate
At present, PPF has a fixed interest rate of 7.1 per cent.
The finance ministry can change the interest rate on a quarterly basis.
The good thing about PPF is that it provides compound interest, so your investment grows faster in the long run.
PPF: Tax Exemption
PPF investment provides one tax exemption up to Rs 1.50 lakh under Section 80C of the Income Tax Act.
The government has PPF under the E-E-E category, where investment, interest, and the maturity amount are tax free.
PPF: How to create over Rs 1 crore retirement corpus?
PPF: Rs 12,500 monthly investment
In our first scenario, suppose you start investing in PPF at the age of 30 and deposit Rs 1.50 lakh a year (or Rs 12500 a year) and continue it for 15 years.
Your total investment will be Rs 22.50 lakh, and your return will be Rs 40.68 lakh, of which Rs 18.18 lakh will come only as interest.
After 15 years of maturity, don’t withdraw your amount and continue investing for another five years.
After 20 years in total, your Rs 30 lakh investment will grow into Rs 66.58 lakh, of which Rs 36.58 lakh will only be the interest.
If you can continue your investment for another five years of extension, i.e., for 30 years in total, your investment will be Rs 37.50 lakh, interest will be Rs 65.58 lakh, and the total return will be Rs 1.03 crore.
It means that by 55, you will create a corpus of over Rs 1 crore.
PPF: Rs 10,000 monthly investment
If you don’t want to invest Rs 12500 a month and want to make a monthly investment of Rs 10,000, you have a fair chance of creating a Rs 1 crore corpus by 55, but you have to start a little earlier.
With a Rs 1.20 lakh yearly (or 10,000 monthly) investment for 15 years, your total investment will be Rs 18 lakh, the interest earned will be Rs 14.55 lakh, and the return will be Rs 32.55 lakh.
If you extend your investment for another five years, your investment will be Rs 24 lakh, the interest earned will be Rs 29.27 lakh, and the return will be Rs 53.27 lakh.
An extension of another five years will give you interest of Rs 52.46 lakh and a return of Rs 82.46 lakh.
If you extend the investment for another five years, i.e., for a total of 30 years, your investment will be Rs 36 lakh, the interest earned will be Rs 87.61 lakh, and the return will be Rs 1.24 crore.
Since the investment duration is 30 years and your target is to create a corpus of over Rs 1 crore by 55, you need to start investing at the age of 25.
PPF: Rs 7500 monthly investment
If your investment amount is Rs 90000 a year (or 7500 a month) and you want to create a retirement corpus of over Rs 1 crore, it is very much possible.
Suppose that if you invest Rs 7500 a month, you will invest Rs 13.50 lakh in 15 years, the interest earned will be Rs 10.91 lakh, and the maturity amount will be Rs 24.41 lakh.
If you extend your investment for another five years, i.e., a total of 20 years, your investment will reach Rs 18 lakh, the interest will be Rs 21.95 lakh, and the maturity amount will be Rs 39.50 lakh.
If you take a further extension of five years and keep investing Rs 7500 a month, your investment in 25 years will be Rs 22.50 lakh, the interest will be Rs 39.35 lakh, and the maturity amount will be Rs 61.85 lakh.
A further extension of five years will stretch your investment to 30 years.
After 30 years of investment, your invested amount will be Rs 27 lakh, the interest earned will be Rs 65.71 lakh, and the maturity amount will be Rs 92.71 lakh.
Another extension of five years will help you achieve your Rs 1 crore retirement corpus goal easily.
After 31 years, your investment amount will be Rs 27.90 lakh, the interest will be Rs 72.35 lakh, and the maturity amount will be Rs 1 crore.
However, if you keep investing for another five years, i.e., a total of 35 years, your investment will be Rs 31.50 lakh, the interest earned will be Rs 1.05 crore, and the maturity amount will be Rs 1.36 crore.
Since your investment duration is 35 years and you had dreamed of achieving the Rs 1 crore corpus by the age of 55, you need to start your investment at the age of 20.
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