Your age-by-age guide to retirement: When to choose SIP, NPS, or EPF

Gone are the days when retirement planning was only for people in their 50s or 60s. In an era when job security feels precarious at best, and inflation steadily chips away at your savings while you watch, the necessity of planning for our golden years is here and in your 20s or 30s. The problem, of course, is which of the myriad financial tools available – from mutual fund SIPs to more structured schemes like NPS and EPF should be the backbone of your retirement portfolio.

Consider Amit and Sneha; both are 35 years old and both have similar incomes but, strategies on retirement planning don’t really align. Amit has perpetually invested through SIPs for 10 years, or so, and just believes in equity led growth with the compounding principle, while Sneha chooses to only contribute to her EPF and, has opted to recently register for the NPS to be tax-efficient and for optimizing her tax savings. Both Amit and Sneha are making plans for their retirement, but it is clear that both risk appetites, financial priorities, and acceptance towards ongoing market volatility shape their choices.

Understanding the Basics

It is essential to be generally aware of the three basic forms of investments in India when saving for retirement – SIP, NPS and EPF – with each type of investment source available to retirement investing purposes with restrictions based on variety of factors relating to an investor’s risk tolerance, age and long-range planning.

Systematic investment plan (SIP)

The most popular method of investing in mutual funds is by a systematic investment plan (SIP), whereby an investor invests a fixed amount of money at predetermined time intervals, typically a month. SIPs can be solely equity focused, debt focused, or hybrid mutual funds.

SIPs are relatively flexible, and can provide considerable long-term appreciation in growth.

For those investors with a time horizon that are further away, investing via SIPs in equity mutual funds would be preferable.

As mentioned, liquidity when investing in mutual funds via SIPs is semi immediate as you can redeem (sell) your investment portions at any time, except in Equity Linked Savings Scheme (ELSS). In case of ELSS which is a tax savings instrument, there is a 3 year lock in period to be eligible for tax savings. On the other hand, ELSS offers significant return potential along with tax benefits under Section 80C of the Income Tax Act, making it a popular tax-saving investment.

National Pension System (NPS)

The second option is the National Pension System (NPS). NPS is a Government controlled (but voluntary) pension program to provide pension income during retirement years. NPS allows any citizen of India, between the age of 18-70 years, to open an account at an NPS point of presence, which is convenient and accessible.

NPS’s structure allows even Non-Resident Indians (NRIs) to legally invest and choose from a mix of equities, corporate bonds, and government securities, offering flexibility in asset allocation to suit different retirement goals. It has provided annualized returns of 8% – 10% over the years.

NPS does have a lock-in period to 60 years of age, but it includes very good tax benefits; ₹1.5 lakh exemption under Section 80C of the Income tax Act, 1961 and ₹50,000 exemption under Section 80CCD (1B). NPS is for the moderate risk investor who may be looking for a potential long term retirement plan as it has a systematic tiered approach.

Employees’ Provident Fund (EPF)

The last option is the Employees’ Provident Fund (EPF). EPF is a mandated saving scheme for wage earning salaried employees that are gainfully employed by an establishment that has 20 or more employees.

Employees and the employer contribute 12% of an employee’s basic wage plus the dearness allowance to the EPF account every month. The interest rate is determined annually by the government (currently 8.25% p.a.) and is one of the most attractive fixed income schemes.

EPF is also relatively safe and tax friendly in India under the EEE tax structure (Exempt-Exempt-Exempt): contributions and interest earned are tax exempt. EPF is also very illiquid for the employee; early withdrawal will only be allowed under certain conditions such as losing your job, buying a home, or a medical emergency. EPF is primarily for salaried persons of moderate risk who are looking for a low risk capital accumulation option for retirement.

Comparison of the Basics

Feature	SIP	NPS	EPF
Returns	10–15% (market-linked)	8–10% (balanced)	8.25% (fixed; but rate could change)
Risk	High (depending on fund)	Moderate	Low
Liquidity	High	Restricted	Very Low
Tax Benefits	80C (only ELSS SIPs)	80C + 80CCD(1B)	80C (EEE structure)
Lock-in Period	None (except ELSS – 3 years)	Till age 60	Till retirement/resignation
Control	Full (choose fund/AMC)	Moderate (choose asset mix)	None
Returns Stability	Volatile	Balanced	Stable
Ideal For	Wealth creators	Structured savers	Conservative salaried

Age-Wise Investment Strategy: SIP vs NPS vs EPF – What Works Best When?

You should absolutely invest based on your stage of your career at different levels from the very beginning of your career until retirement. Below, is an exhaustive explanation about how SIP, NPS, and EPF can fit best based on your potential financial goals and risk profiles according to age.

Age 20-30: Maximize growth through Equity SIPs

Risk Appetite: High – Given your age you probably do not have many personal financial liabilities and as a result you have the longest time horizon to recover from potential market declines. This essentially allows for riskier investments for capital growth, which could pay you back many years over on a longer-term basis.

Financial Goal: Wealth creation through long-term compounding. The earlier you start, the more potential compounding has to work over a long period of time, whether that be 10, 20 or more years of compounding!

Best Option: SIP in Mutual Funds – Investing via monthly SIPs in equity has much more long-term potential for returns versus a fixed-income product like EPF or NPS. Choose the equity mutual fund schemes you invest in carefully.

Example: A SIP of ₹5,000/month for 30 years compounded annually at a CAGR of 15% would create a corpus of ~₹ 3.5 Crore.
Why not EPF/NPS?: While it is widely known that EPF is compulsory and mandatory for all salaried employees, EPF and optionally NPS, are the more less risk taking options. You are essentially locking in your financial capital, that could be earning you better returns by staying invested in equity.

Ages 30–40: Diversifying & Locking in Tax Benefits

Risk Appetite: Moderate to High – This is your prime earning period. However, because of new responsibilities, you have to balance both growth and safety.

Financial Goal: Build wealth while also utilising tax – This is your decade to capture your savings from all savings instruments that have both long-term growth and deductions.

Best Strategy: Keep equity SIPs for growth, add a NPS for retirement (and an additional ₹50,000 tax deduction under Section 80CCD(1B)), and let your EPF grow via your salary.

Example: A 30-year-old who is investing ₹15,500/month into NPS has the potential corpus to give them around ₹70,000 monthly pension in retirement.

Why This Works: The SIPs give you some allocation linked returns, the NPS is building an income for retirement with tax savings, and your EPF will be simple debt exposure—giving you a well-rounded, future-proof portfolio.

Age 40–50: Capital Protection & Retirement Planning

Risk Appetite: Moderate –At this point in your life it is time to shift your focus from growth to protecting your wealth and the future.

Financial Goal: Stability and building a retirement corpus. This phase is to consolidate growth, systematically decrease your exposure to equity, and to ensure your portfolio is ready to generate income.

Best Mix: Continue to keep your EPF account for its steady debt returns, increase the contributions made to your NPS account and hold a balanced equity-debt asset allocation within NPS. Consider gradually easing off on SIPs and converting them into hybrid mutual funds (e.g. balanced advantage or equity savings funds) where risk is mitigated without triggering a sell-off of the growth prospects.

Example: A 40-year-old investing ₹1 lakh/month in NPS for 20 years at 12% CAGR can build a corpus of nearly ₹10 Cr and earn a pension of about ₹2 lakh/month, assuming 40% annuitization at 6% annuity rate.
Why It Works: EPF is basically tax free compounding without risk, the NPS balances long-term growth but also generates structured retirement benefits and tax savings. Hybrid SIPs are made to reduce risk too but still provide absolutely better returns than fixed income. The main reason this mix is best at this phase, is to start hedging into safer assets while not excluding growth.

Age 50–60: Focus on Stability & Prepare for Retirement Income

Risk Appetite: Low – As you approach retirement your objective is totally on capital preservation.

Financial Goal: Address financial security through dependable sources of income and ensure your wealth is saved and preserved.

Best Approach: Leave the EPF account open until the member is 58 years old to capture interest. Shift the NPS equity exposure to conservative and start thinking about Systematic Withdrawal Plans (SWPs) or a hybrid debt funds for retirement income.

🔍 Example: If a 50-year-old invests ₹1.85 lakh/month for 10 years at 9% return, they can retire with ₹3.43 Cr, and set up a 3.5% annual SWP to receive ₹1 lakh/month as post-retirement income from hybrid mutual funds.

Why it will Work: The EPF account gives total safety and tax-free compounding; a conservative NPS provides controlled pension income; and SWP from hybrid funds will provide low-risk income without relying on the core corpus.

Selecting SIP, NPS, and EPF is not about choosing one or the other – it is about matching them with your life stage and financial goal. In the 20s and 30s, you should typically use equity SIPs to grow your wealth; in your 40s and 50s, you will lean toward NPS and EPF to stabilize your wealth and take advantage of tax benefits to prepare for retirement.

Having said this, it must be said that financial planning is a very personal exercise. There’s no one size fits all here. To give you an example, there could be 60 year olds you have a lot of appetite for risk because they have already provided for the needs. In this case, they could perhaps continue their SIPs.