After the mandatory lock-in of 15 years, you can still choose to continue with your account either by continuing to invest or without any further investment. This extension can be done in a block of 5 years, and you can extend your tenures to 20, 25, 30 years and so on.
Becoming a crorepati or making a crore with average monthly investments is difficult without equity exposure. However, long-term periodic investment in some investment avenues like the Public Provident Fund (PPF) can do the trick with the power of compounding.
Depending on the amount you invest monthly and the period of investment that you are willing to commit, will decide the timeframe to reach the target of Rs 1 crore. The longer the money stays invested, the more it grows. Note that, you can only invest Rs 1,50,000 in PPF in a year.
PPF is one of the safest debt instruments as it has sovereign backing of the government, and many savvy investors use PPF to meet the debt part of their investment portfolio. The most attractive benefit of PPF is, it offers one of the highest returns amongst fixed income options, along with tax benefits. Under PPF, investors can claim tax deduction under section 80C of the Income Tax Act for the amount invested up to Rs 1.5 lakh in a given year.
PPF is a long-term commitment product, as it comes with a lock-in of 15 years. Hence, if you are planning to invest in PPF, keep in mind long-term goals such as retirement, child education, marriage, etc. After the mandatory lock-in of 15 years, you can still choose to continue with your account either by continuing to invest or without any further investment. This extension can be done in a block of 5 years, and you can extend your tenures to 20, 25, 30 years and so on.
Here is how you can reach your goal:
1. After the 15-year lock-in period, you can continue to invest in your PPF account till the corpus grows to Rs 1 crore. Hence, if at the starting of your career you are willing and certain about committing to a monthly investment of, say, Rs 4,585, you will be a crorepati through PPF in about 35 years. You can reach that amount given your PPF account attracts the current interest rate of 7.9 per cent, and stays the same for the entire duration of the investment. If you want to get there early, you can make a monthly investment of Rs 6,945 for 30 years.
2. If you wish to reach the Rs 1 crore target faster, you can do so by making a monthly investment of Rs 10,720 for 25 years. This is one of the quickest possible timeframes to reach the Rs 1 crore target through PPF. With an annual maximum investment limit of Rs 1.5 lakh in PPF, you can make a maximum outgo of Rs 12,500 monthly, and can reach the Rs 1 crore target in around 23 years. Nevertheless, you will not be able to withdraw the money before 25 years as an extension happens only in the block of 5 years.
3. Another option is you stop making an investment after the initial lock-in of 15 years. Make investments for 15 years and then leave your PPF account to earn interest and keep growing until it becomes Rs 1 crore. To do so, and reach the target of Rs 1 crore in 35 years, make monthly investments of Rs 6,270 and keep investing for the whole tenure. At the end of 15 years, the amount will grow to Rs 21.87 lakh. Do not invest further, and leave the funds in your account for another 20 years and it will grow to Rs 1 crore. Instead of 35 years, you can also reach the goal in 30 years if you make monthly investments of Rs 9,165 for the initial 15 years, and keep the corpus with PPF for the next 15 years.