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MONEY TRAP - 11 : Borrowing From Your Retirement Fund

There is a famous saying “Retirement is when you stop living at work and begin working at living”. Yes, retirement is when you start living for yourself. No boss to tell you what to do. No more irritating office colleagues. You have time…time…and more time. You can sit on the sea shore all evening and simply dream…dream…dream.

Retirement is also the time when you catch up on all that you ever wanted to do, but just never had the time. Yes…It’s time for your hobbies. You love traveling. Now it’s time to see the World. Time to catch up on old friends at the club. Yes…Life’s Great….But there is a small problem. Having a great retired life costs money. You got to collect this money in your working years. Without money, retired life can be a living hell. You will have no money for retirement if you keep raiding your retirement kitty. Want to have sufficient money to happily enjoy your retirement years? Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not mis-guided while buying any kind of financial products.

Dipping into retirement funds for son’s education

Your son wants to be a computer engineer. Your daughter wants to be a doctor. A good education today is very expensive. You are ready to do anything to give your children a good education….Even dip into your retirement fund. But is this a good idea? Retired years mean no income. How will you manage your retired years without sufficient money? Will you ask your children for money in your ripe old age?

Mishra worked as a manager in a garment store in Chennai. Mishra had a son, Rahul, whom he loved very much. Mishra believed that to lead a high-quality life, Rahul needed to have a good education. Rahul was a good student and wanted to be a computer engineer. When Rahul secured a seat in a reputed engineering college, Mishra was the happiest man in the World. But there was a small problem. The engineering college and boarding fees for the entire computer engineering course was INR 8 Lakhs. Mishra though earning a decent salary, required time to collect this large sum of money. Mishra had a serious decision to make. Should he compromise on Rahul’s education or should he redeem the few lakhs worth of equity mutual funds, he had kept aside for his retired years. Mishra made his decision. He sold the equity mutual funds and used the money to give Rahul a good education.

Rahul soon got a job in a reputed MNC. Mishra retired a few years after Rahul got married. Mishra soon found the money in his retirement kitty, insufficient to meet his expenses. Mishra was forced to ask his son Rahul for money to meet daily expenses. Though Rahul had no problem giving the money, his wife was not too happy about it. In spite of knowing this Mishra was forced to take money from his son. Mishra was feeling ashamed of himself, but there was nothing he could do. Do you want to find yourself in a situation similar to Mishra?

Did Mishra make a mistake in funding his son’s education? No, definitely not. Sure, he was forced to sell the equity mutual funds he had kept aside for his retirement, but he should have found a way to replenish his retirement kitty. What do you learn from Mishra’s mistake? Come what may; try not to touch your retirement fund. If you are forced to do so, try to replenish it as soon as you can.

SEE ALSO: Financial Plans For Retirement Benefits

Withdrawing money from the EPF

You earn a good salary….yet, at the end of the month, you face the same old problem. No money. Expenses have eaten up all your money. How will you save money for retirement? This is where the Government has given you an excellent tool to save for retirement. The Employee Provident Fund, popularly known as EPF. This is widely regarded as a forced scheme, as your employer deducts 12% of your basic salary and deposits this money in the EPF. Of course…Your employer also makes an equal contribution as you make, towards your employee Provident Fund. But what do you care… The Government is forcibly taking your money which could be used to buy…well a laptop…smartphone…anything you want. You conveniently forget that a lot of our citizens have retired comfortably with over a crore in their retirement kitty, simply by not touching the money in the EPF till retirement. But EPF had a catch…If you were out of job for 2 months or more, you could withdraw the entire amount in your EPF. This rule has since been modified, where you can withdraw only your own contribution and the interest earned on it.

Dipping into retirement funds for daughter’s marriage

Let us understand why borrowing from your retirement fund is a real bad idea. Ramesh used to work as an executive in a travel agency.  He used to change jobs often. Whenever he changed jobs, he used to withdraw money from the EPF. All he had to do was show that he was unemployed for 2 months or more…Not too difficult. He used to then lavishly spend this money. Ramesh got married but still the old habit of changing jobs regularly, stuck to him. Sometimes he used to withdraw his EPF…Sometimes he used to keep it. Ramesh also had investments in fixed deposits and a few mutual fund schemes. Ramesh had a daughter, Sudha who was the apple of his eye. After completing her graduation, Sudha got engaged and was soon to be married. Ramesh vowed to spare no expense on Sudha’s marriage. He sold most of his mutual funds and liquidated his fixed deposits. With this money, Ramesh celebrated his daughter Sudha’s marriage lavishly. Ramesh soon retired and settled down to enjoy a happy retired life. Ramesh found that the money he had in his retirement kitty, was not sufficient for him. He got hardly any money from the EPF, as he had spent most of it in his younger days. He was forced to ask his daughter for money to meet his expenses.

What was the mistake made by Ramesh? Ramesh used to withdraw the money from the EPF, whenever he changed jobs. A mistake he would soon regret. In spite of not having saved much money for his retirement, he still spent a lot of money on his daughter’s marriage. Should he have gone for such a lavish wedding for his daughter, at the cost of his retirement funds? You be the judge.

Mr. C.S. Sudheer

Mr. C S Sudheer is the founder and CEO of – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of He aims to build a nation that is financially literate with investment savvy citizens.

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