SIP vs PPF: Rs 1,32,000/year investment for 35 years; which can build a higher retirement corpus

Planning for retirement is not an easy task, but here are two popular options to consider if you are thinking of getting one, SIPs and PPFs. In a Systematic investment plan you invest in the market, which means your returns may vary. On the other hand, PPFs offer fixed returns, but they're generally lower in comparison to SIPs. The key to success in both options is to invest regularly and be disciplined. But if you invest Rs 11,000 every month in SIP or Rs 1,32,000/year for 35 years in PPF, which scheme do you think will help build a higher retirement fund? Let’s find out.

SIP

A Systematic Investment Plan (SIP) allows you to invest a fixed amount regularly in a mutual fund scheme. You can choose to invest daily, monthly, quarterly, or yearly, making it a convenient and disciplined way to build your wealth.

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PPF

Public Provident Fund (PPF) is a popular savings scheme designed to help individuals build a retirement corpus. It's also a great way to diversify your investment portfolio. You can easily open a PPF account at a bank or post office.

How much do you need to start a SIP?

The minimum amount to invest in an SIP is Rs 100. One can also increase, decrease, or stop their SIP.

PPF Investment Limits

The minimum deposit in a financial year is 500, whereas the maximum is Rs 1.5 lakh.

How does SIP work?

A fixed amount is automatically deducted from your bank account and invested in mutual funds. These investments happen regularly, and you get units based on the fund’s value (NAV).

How does PPF work?

This scheme, run by post offices and banks, offers voluntary contributions to its account holders. Post Office offers 7.1 per cent interest rate compounded yearly.

PPF calculations: Monthly Rs 1,32,000/year investment for 35 years

Yearly investment: Rs 1,32,000 (monthly investment Rs 11,000 x 12 months)
Time period: 35 years
Rate of interest: 7.1 per cent

PPF: What will be your corpus in 35 years with Rs 1,32,000/year investment?

On Rs 1,32,000/year contribution, the estimated retirement corpus in 35 years will be Rs 1,99,74,114.

SIP investment conditions

Since there are no fixed returns in SIP investment, we are calculating as per annualised returns of 8 per cent (debt fund), 10 per cent (equity fund) and 12 per cent (hybrid fund)

SIP: Retirement corpus on Rs 11,000 monthly investment for 35 years (hybrid fund)

At 12 per cent annualised growth, the estimated corpus in 35 years will be Rs 7,14,47,960. During that time, the invested amount will be Rs 6,20,000, and capital gains will be Rs 6,68,27,960.

SIP: Retirement corpus on Rs 11,000 investment for 35 years (equity fund)

At 10 per cent annualised growth, the estimated corpus in 35 years will be Rs 4,21,11,044. The estimated capital gains will be Rs 3,74,91,044.

SIP: Retirement corpus on Rs 11,000 investment for 35 years (debt fund)

At 8 per cent annualised growth, the estimated corpus in 35 years will be Rs 2,54,00,925. The estimated capital gains will be Rs 2,07,80,925.

(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)