Monthly EPF Withdrawal Starting April 2020
The Prime Minister of Malaysia had announced on Monday (23rd March 2020) that the government is taking steps to cushion the impact of Movement Restriction Order due to COVID-19 to our economy. One of them is to allow EPF members monthly withdrawal from their account.
As soon as that announcement was made, I’ve heard rumours that scammer had already posted links on “how to withdraw your savings”. I said rumours because I didn’t see it, only from what people are sharing on social media.
Why do we have EPF?
Before I give you my opinion on this, let me start of why did we have EPF in the first place? Experts say that you need to manage your finance, from paying yourself first, to creating a 6 to 12-month reserve for emergency use, to investing for your future. You can read it in detail here. Now, how many of you have the discipline to do that? I can only find a hand few of people who have the discipline to maintain their financial well being. So for the rest of us? There’s EPF. Yes, those who don’t have the discipline, the government created EPF. As with the disciplined ones, you can still use your savings for the important essential like making a house downpayment or to further your studies. Or you could also invest in different types of assets.
Withdrawal of your EPF?
As many of us know, you can withdraw part or whole of your savings in EPF. You can check-out on what occasion you can withdraw your money here. You can also invest back your savings! The bottom line is, it’s your money, you can still use it if needed to. There’s no point having a retirement fund at the end when you couldn’t survive for the next few months, right?
Now, because of the current situation, it had impacted a lot of people. I don’t know how is my favourite pisang goreng stall going to survive? And if you have just started working for yourself (yours truly included), this is a disaster. But don’t you have a backup? Well, a backup can run out if you don’t mitigate the problem. But the central bank has issued a moratorium on loans. That’s just to lessen you burden for 6 months but I foresee this could take more than 6 months to recover. A lot of things to consider.
For me, there’s no right or wrong. It’s just boiled down to choices. Now let’s do the calculation. Let’s assume that you’re 40 years old, you’re not working and RM100,000 is whats left in your EPF. You going to apply for EPF monthly withdrawal. RM500 for 12 months is about RM6,000 in total. So after withdrawal that left you with RM94,000 in your EPF. Sounds legit? OK.
Now say, for instance, EPF is giving 6% average return on your savings. So RM6,000 that you have withdrawn is worth RM14,379.35 when you reach 55 years old. That’s how much you’re losing out. However, your RM94,000 that is still in your account is worth at RM225,276,47. So based on this assumption, think you will still have about where EPF recommend you should have when you reach 55. Everybody can do this calculation, you just need to download TVM Calculator into your handphone. So please, withdraw if it means that you could survive during these hard times.
But if you are not affected by the movement restriction and want to explore this option too, say to grow your wealth, by all mean please do. If you invest it on something that can give you a 7% average return, you could get RM16,554.19 at 55 years old. At 8% it will get you RM19,033.01, 10% will get you RM25,063.49, 12% will get you RM32,841.39 and so on so forth. But please, don’t go for “quick rich scheme”, I beg of you. Please don’t.
It Boiled Down To Your Choice
As I said, there’s no right or wrong, it’s just choices. And whatever choice you make, you have to live with it. Simple as that. It’s your money and you are free to do whatever you desire. As for me, I’m contemplating on which direction I should go.
