Is it wrong to sell unused Household Gold and Retire Early?

This is a controversial topic. And I am sure you know that.

We Indians love our gold. And most people can’t even think about selling it. It’s like the worst-case scenario for them to sell gold. But hear me out here.

Take the case of someone who mailed me recently. He wrote a long mail but here is the abridged (and slightly edited) version:

I am 47 and work in the private sector. I hate my job. Not just this one but the whole idea of it. I would like to quit this mad rat race as soon as possible. But given the small investments I have, it seems like a distant unachievable dream. But our family does have a lot of unused household gold*. Just like many other Indian families. This may sound very wrong at first (because we are brought up to think that family gold shouldn’t be sold unless there is a crisis). But would it be such a bad idea to sell all the gold and use it to retire early? I want to take back control of my life. And liquidating the family gold is one easy way to do it. I know people will judge me. But I think it’s worth considering. Why work for several more years hating every minute of it when you can sell some gold (you have no use for) and be done with this kind of life. I don’t mean to not work ever again. I just want to be financially free and decide and live my life without thinking about my salary or how much money I have. Do you think it’s a good idea? Or I am just totally wrong?

* He didn’t mention the exact quantity of gold he had.

Interesting mail. Isn’t it?

It is true that many Indian families have so much gold that if they liquidated it, they wouldn’t have to work for money for decades. Ofcourse people judge you with a socio-lens if you do that and they come to know about it. But let’s forget about the ‘people’ for time being. It’s your life. You decide what you want to do with it.

Can you do it? Can you sell unused Gold (jewelry) in the house and money to streamline your financial life?

Yes, you can do it.

But should you do it?

It’s up to you frankly. As for me, I don’t see anything wrong with it though, given my Indian upbringing, it does seem a bit odd a first. 😉

I conducted a Twitter poll (link) to see what others thought. Though it’s a small sample size, still here is the breakup of responses:

So how can one sell household gold to retire early?

That first depends on what is your target retirement corpus? Is Rs 1 crore enough to retire in India? Or do you need Rs 5 crore to retire?

Let’s say you do some retirement planning maths and find out that you need Rs 2.5 crore to retire today.

You also have some of your own savings and investments. Let’s assume you have managed about Rs 1 crore worth of investments by yourself. So you are short by Rs 1.5 crore.

I checked the gold prices today:

Let’s say the average price is Rs 47,000 per 10 grams.

So how much gold do you need to have at that price so that if you sell, you can get the remaining Rs 1.5 crore you need to achieve the target retirement corpus?

You would need about 3.19 kilograms of gold!

I know that’s not a small amount of gold to have.

But knowingly or unknowingly, many families do have a lot of gold. You would be surprised to see how much gold your family has once you and your spouse sit together to find that out.

Easier said than done but that’s how we Indians are. We just love gold.

Here to keep the discussion simple, I have not considered taxation on selling physical gold in India. And it’s not just about the Income Tax on Selling Physical Gold. But more importantly, most gold in houses is passed on from one generation to other. So it’s also about Income tax on the Sale of Inherited Gold Jewellery in India. Do read this detailed article I wrote some time back about taxation on selling physical gold in India. That is something you need to be careful about if and when you do decide to take this route.

And just to complete the discussion, here is the amount of gold you need to sell (and if your spouse agrees!) to get the following amounts to get some shot at early retirement:

• Rs 1 crore – At current gold prices, you need to sell 2.12 kg (or 2127 grams) of Gold in India
• Rs 2 crore – At current gold prices, you need to sell 4.25 kg of Gold in India
• Rs 3 crore – At current gold prices, you need to sell 6.37 kg of Gold in India
• Rs 4 crore – At current gold prices, you need to sell 8.50 kg of Gold in India
• Rs 5 crore – At current gold prices, you need to sell 10.64 kg of Gold in India

A study by the World Gold Council has found that we Indians hold about 25,000 tonnes of Gold. So we are indeed the world’s largest hoarders of the (privately held) yellow metal. And this might be close to 35-40% of India’s GDP. Also, check the gold reserves of major countries to see how much gold we Indians hold privately!

As Gold.org says here, Gold has a central role in the country’s culture, considered a store of value, a symbol of wealth and status, and a fundamental part of many rituals. Gold is also central to personal life events too. Gifting gold is a deeply ingrained part of marriage rituals in Indian society. In fact, weddings generate approximately 50 percent of annual gold demand.

In India, gold is considered a symbol of social status, financial security, and cultural legacy. And these are the primary reasons why Indians don’t see shedding some gold to upgrade their liquid finances as a viable option.

The government also understands this and is working on measures that include using household gold as collateral to print more currency! The idea is that the newly minted currency will not put any pressure on the fiscal situation owing to the presence of collaterals. Read more about it here. Also, read about the Gold Monetisation Scheme in India here.

I know many of you would be judging me here. But please don’t. This is just a thought experiment to see if it does make sense to go against the common wisdom and see if one can live a comfortable life by properly using the used assets of the household.

And just so to be clear, I am still in favor of investing in gold in your portfolio. I have written about it at Should Gold ETFs & Gold Bonds be part of portfolio? Depending on your requirements, risk profile, and other factors, one can consider having 5-15% in gold at any given time.

Related reading – Should you buy gold coins for investments?

So that’s about the idea of selling unused household gold and trying to become financially independent. Do give this a thought. I know most people won’t subscribe to this idea. But such common herd thinking is also one of the reasons why most people in India will never retire early or truly become financially independent.

Think about it.