Why should you Combine your PPF and EPF to Invest in a Non-Cumulative FD

Once you retire, it is important to re-visit your approach to investing. As a thumb rule, you must lower the component of high-risk investments and increase your investment in stable, low-risk options. More importantly, you must undertake measures to ensure that you have a regular income that replaces a salary.

One way of doing this is by re-investing your EPF and PPF in an FD. Instead of depositing it in your bank account, try this option to multiply your wealth and boost your monthly income.

The benefit of combining earnings from your EPF and PPF, and investing in an FD

To understand how this financial move can help you, take a look at the numbers:

  • Let’s assume that you deposit Rs.1,000 each month into your PPF until it matures. Fifteen years later, once the PPF reaches its maturity, you will have a corpus of Rs.3.45 lakh.
  • Now, at retirement, let’s assume that your EPF amounts to Rs.7 lakh.
  • This gives you a total of Rs.10.45 lakh.

Take a look at how this sum grows if you put it in a savings account.

If you deposit Rs.10.45 lakh into a savings account that offers a 4% interest rate per annum, for 5 years, your initial deposit will grow to Rs.12.54 lakh. Here, the interest earned is Rs.2.09 lakh.

Now, take a look at what happens if you put it in a fixed deposit.

Let’s assume that your fixed deposit offers 7.85% interest per annum, and you opt for FD (Fixed Deposit) for a tenor of 5 years. At the end of the period, your initial investment of Rs.10.45 lakh will grow to Rs.15.24 lakh. Here, the interest earned is Rs.4.79 lakh.

  • So, when you choose to park your earnings from an EPF and PPF in a fixed deposit, you earn Rs.3.3 lakh more than you would if you choose a savings account.
  • Choosing a fixed deposit also means that you enjoy earning more than double the interest. While a savings account offers Rs.2.09 lakh as interest, a fixed deposit gives you Rs.2.7 lakh more.

Besides the monetary benefit, here are the other reasons why a fixed deposit makes for an excellent investment.

Superior Safety: Unlike several investment options, fixed deposits aren’t linked to the market and so, aren’t volatile. Once you start a fixed deposit, you can rest assured that your corpus is secure.

Flexible tenor: A fixed deposit gives you the chance to choose a tenor that’s short, mid-length or long. Depending on your financial plan, you can choose an option that suits you. It also gives you the option to make a withdrawal if the need arises, giving you the benefit of liquidity.

Flexible amount: You can save as much or as little as you want to via a fixed deposit. Whether it is just Rs.25,000 or Rs.10.45 lakh, you can invest any amount.

Payout options: A fixed deposit gives you the chance to choose a non-cumulative interest option. This means that you can choose from monthly, quarterly, or half-yearly payouts. If you pick a monthly option, you can easily create an alternative source of income when you retire.

Higher Rate of Interest for senior citizens: Most lenders offer senior citizens FD a higher rate of interest. This means that not only can you arrange for a steady source of income, but you can also multiply your wealth more quickly.

Ease of operation: Applying for a fixed deposit and managing it is no chore. You can manage and apply for one online. Additionally, you can also make use of the doorstep service that most good financial institutions offer. This way, you don’t need to go to the branch to open an FD. A customer executive will pay your home a visit to complete the formalities.

Read More: Fixed Deposit Calculator

Loan against FD: At a later date, should you choose to, you can also take a loan against your fixed deposit. Usually, you can take up to 75% of your FD as a loan.

Choosing this option gives you the benefit of making good use of your EPF and PPF amount and ensures that you can get the most out of the sum by re-investing it in a fixed deposit. When you’re looking for fixed deposits that make the cut, consider FDs from NBFCs. They offer high interest, security, and flexibility.

By Luke Harper

I am a professional writer and blogger. I’m researching and writing about innovation, Entertainment, technology, business, and the latest digital marketing trends click here to go website.

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