Should You Tap On Your Provident Fund Account Before Retirement
A provident fund is intended to offer a long-term benefit when you retire. It is designed to offer you financial security when you retire. It is therefore not advisable for you to tap on your PF account until that time you retire. This ensures that when you enter the golden days, you have something that can keep you surviving.
In any person’s life, retirement planning is an important goal failure to which it can spell disaster to the person. At old age, it is most likely that you do not have a stream of revenue that can sustain you during those times. It is also a period when people tend to have ailments such as chronic diseases that may require extra medical care.
If you are ill prepared in your retirement, you may have difficult times with finances. However, often people tend to tap into your provident fund accounts for one reason or another. There may be no need to say that one cannot withdraw from their provident fund, because sometimes emergencies do strike and there is no other option where one can get cash.
It only becomes logical if you are tapping on your PF account to fund emergency cash needs, otherwise, if you are doing it not for such purposes, you may be causing harm than gain to yourself. The amount should be utilized after someone retires or stops working or when their earnings have been depleted.
For other emergencies, before one withdraws from their PF account, they should exhaust other avenues such as liquid funds, debt funds, or savings accounts. The returns on PF are higher than inflation and in addition, they are tax-free. When you withdraw from the PF, it subjects you to the following consequences.
Your retirement may go haywire:
You may not be able to save enough in your PF if you are tapping on it. Therefore, when the retirement age comes, you may have little to take you through the golden years. You need to weight the retirement planning benefits and the need to withdraw from your PF before that age.
You could lose the tax-free status:
When you dig into your PF account, you may be excluded from the tax-free status because that cash cannot be put back. When you lose the tax-free status, it means you may begin to be taxed and this could eat the savings kit you have put in your PF.
Withdrawing from your PF may be viewed as a classic case of not having a holistic approach in your financial decisions and lack of prioritization. When people tap into their PF, it forces them to push their retirement age or make higher contributions to strengthen their retirement kit in the last years before they are laid off.Sponsored Links
In short, you may only withdraw from your PF if you have a pressing need for cash and you can prove that. You also need to realize the situation you are putting yourself into because you could disorientate your retirement savings completely and suffer during the old age. There are stringent rules applied when one wants to withdraw from the scheme before retirement.