A lucrative job offer coming your way; you would definitely cling on to it, won’t you?
And sure it’s healthy to progress in life and strive to reach the top of the pyramid! But soon withdrawing your Provident Fund (PF) money each time you switch jobs could soon become a thing of the past.
The Employees’ Provident Fund Organisation (EPFO) has urged the Government to bar workers from pulling out their PF balances on changing jobs. “Every six months to a year you change your job and withdraw your PF. That makes us more like a bank,” said Central PF Commissioner Samirendra Chatterjee. He also further added saying, “The PF account should serve its purpose of social security — having a ` 15,000 balance at retirement is ridiculous. It’s in the larger interest of workers to bar withdrawals.”
So, now you may be wondering how do I withdraw my money.
The fact is you don’t actually need to withdraw. Because you can ideally simply transfer the balance accumulated from your old PF account to your new PF account with your new employer.
But despite this option available, many resort to withdrawing the balance so accumulated in their PF account. And while you may argue saying it’s a very small component of the salary; but in our opinion doing so you are digging your own grave, for your retired life. Hence, the ideal the thing is to “transfer”, as this will help you in creating a nest egg for your retirement as you would continue to earn interest on the balance standing to the credit of your account.
Remember every penny saved now would be of great help to build a retirement corpus in future.
So, the next time you hop a job and climb the success ladder do keep in mind the following negatives about early PF withdrawals:
- Early PF withdrawals are subject to taxation as per relevant tax slabs (early withdrawal indicates withdrawal within 5 years)
- Loss of interest on the amount withdrawn from the PF account
- A dent in your retirement corpus