Don’t Withdraw From Your Retirement Corpus For Your Child’s Education

Ranvijay Rathi, 52, email

I spend Rs 55,000 monthly on my parents’ medical care. I also need Rs 12 lakh for my daughter’s higher studies over the next three years. My current retirement corpus is Rs 60 lakh, which is way below my Rs 1.5 crore target, considering I will still have dependents in five years. Should I temporarily reduce retirement investments or explore other ways to fund these expenses?

You can claim up to Rs 50,000 for actual medical expenses incurred for senior-citizen parents under Section 126 of the Income-tax Act, 2025, provided they do not have health insurance and if you opt for the old tax regime.

Your daughter’s higher studies is a short-term goal, so avoid equity, where a market fall could force a poorly timed withdrawal. Use short-term debt funds or FDs, or consider an education loan, with interest eligible for deduction under Section 129.

As far as possible, do not withdraw from your retirement corpus of Rs 60 lakh. Let compounding bridge the gap towards your Rs 1.50 crore target. If you withdraw Rs 12 lakh for education, continue systematic investment plans (SIPs) of at least Rs 10,000 for the next nine years, assuming you wish to retire at 60.

Suhel Chander CFP®, Handholding Financials

Pratham Singh, 45, email

My wife and I expect to receive Rs 80 lakh from selling a property. With no major loans, we want this money to support our retirement in eight years, without taking unnecessary risks. How should we invest it?

Gradual investment through a systematic transfer plan (STP) is preferable to lump sum as it reduces timing risk and spreads investment over 12-18 months. Keep the money temporarily in liquid or ultra-short-duration debt funds before transferring it to equity or hybrid funds through STP.

A suggested allocation is 45-50 per cent equity through large-cap index and flexi-cap funds, 35-40 per cent short-duration debt or corporate bond funds, and 10-15 per cent balanced advantage or equity savings funds. Review the outcome and rebalance annually.

Two to three years before retirement, gradually shift towards debt and conservative hybrid funds. At retirement, start a systematic withdrawal plan (SWP). Keep 2-3 years of expenses in debt or liquid funds, with the balance invested for continued growth.

Say, the corpus grows to Rs 1.3-1.4 crore in eight years at a compounded annual growth rate (CAGR) of 9-12 per cent, a monthly SWP of Rs 70,000 (Rs 8.4 lakh annually) is enough. Even with 6-7 per cent post-tax growth, the corpus could sustain withdrawals for 20-plus years. Check the applicable tax treatment, as it varies by fund type and holding period.

Hina Shah, CFP®, Luhem2 Wealth

Rajiv Desai, 43, email

I work in the private sector, and may lose my job in six months due to restructuring. With a 12-year home loan, two school-going children, mutual funds (MFs) and Employees’ Provident Fund (EPF) investments, should I continue my SIPs, prepay the loan, or build an emergency fund?

With a possible job loss within six months, prioritise liquidity over debt repayment. Build an emergency fund covering 6-12 months, or up to 24 months if finding another job may take longer, of essential expenses, including home loan equated monthly instalments (EMIs), school fees, insurance premiums and household costs. Calculate your monthly “survival number” and keep the reserve in a savings account, liquid or ultra-short-duration MFs and/or fixed deposits (FDs).

Continue SIPs only if your emergency fund is already in place. Otherwise, pause or reduce SIPs temporarily and redirect the cash to the emergency fund. Avoid prepaying the home loan now, as money becomes difficult to access during a career break. Avoid redeeming equity MFs or EPF holdings; keep EPF withdrawal as a last resort.

Cut discretionary spending, avoid taking new debt, and ensure an adequate health and term insurance, including personal cover. If job loss occurs, discuss EMI moratorium or restructuring of loan with your lender before defaulting. In addition to it, update your CV, network and start your job search early.

Uma S. Chander, CFP®, Handholding Financials