{"id":46285,"date":"2020-12-23T09:20:46","date_gmt":"2020-12-23T01:20:46","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=46285"},"modified":"2021-08-24T19:31:30","modified_gmt":"2021-08-24T11:31:30","slug":"epf-savings-withdrawal","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/epf-savings-withdrawal","title":{"rendered":"What’s The Point Of Keeping My Savings In EPF If I Do Not Have Money To Survive Now?"},"content":{"rendered":"

We all know that the money in our Employees Provident Fund (EPF) account is to be used for our retirement but what if we need the money now?<\/p>\n

This year has been extremely challenging for Malaysians who lost their jobs due to the pandemic. According to the Social Security Organisation (Socso), 90,000 workers<\/a> have applied for unemployment benefits with the organisation so far this year. In total, there are over 700,000 people<\/a> who remain unemployed this year.<\/p>\n

For those who have no income or unable to find enough income now, it\u2019s hard to even think about next month, let alone retirement years later.<\/p>\n

In this year alone, the government had announced additional withdrawals under i-Lestari<\/a> and i-Sinar<\/a> for members to have access to their EPF savings in the event that they lost their job or have suffered reduced income. The EPF contribution rate for employees had also been reduced from 11% to 7% from April to December this year, and 9% from January to December next year.<\/p>\n

Though necessary, these pandemic-related initiatives could potentially leave a long term impact on your retirement savings.<\/p>\n

If you had a chance to tell EPF what to do with your savings, what would you want EPF to change?<\/p>\n

Just take three minutes to tell EPF in this survey. <\/div><\/div>\n

<\/span>What happens if you use your retirement savings early?<\/span><\/h2>\n

With the widespread job losses and salary cuts this year, it\u2019s no surprise that many people would be tempted to use their retirement savings. When your home is in danger of being auctioned or your car repossessed right now, it doesn\u2019t help if you can only make use of your retirement savings 20 years later.<\/p>\n

However, you need to decide if the benefit gained by using your retirement savings is more than the cost of losing out on the potential dividends you stand to gain if you don’t withdraw it.<\/p>\n

EPF members who withdraw their savings may lose out on the benefits of compounding returns they could have achieved over a number of years.<\/p>\n

So, how much will you stand to lose?<\/p>\n

For example, starting December 21, EPF members who qualify can withdraw between RM10,000 to RM60,000 under the i-Sinar programme.<\/p>\n

If you keep your RM60,000 in retirement savings instead of withdrawing it to spend, here\u2019s how much you\u2019ll have after five years based on just 4% interest earned per year.<\/p>\n\n\n\n\n\t\n\n\t\n\t\n\t\n\t\n\t
Year<\/th>Value of retirement savings<\/th>Interest earned<\/th>Value at year end<\/th>\n<\/tr>\n<\/thead>\n
1<\/td>RM60,000<\/td>RM2,400.00<\/td>RM62,400.00<\/td>\n<\/tr>\n
2<\/td>RM62,400.00<\/td>RM2,496.00<\/td>RM64,896.00<\/td>\n<\/tr>\n
3<\/td>RM64,896.00<\/td>RM2,595.84<\/td>RM67,491.84<\/td>\n<\/tr>\n
4<\/td>RM67,491.84<\/td>RM2,699.67<\/td>RM70,191.51<\/td>\n<\/tr>\n
5<\/td>RM70,191.51<\/td>RM2,807.66<\/td>RM72,999.17<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n
Compound calculator: https:\/\/www.thecalculatorsite.com\/finance\/calculators\/compoundinterestcalculator.php<\/a><\/h6>\n

If you add up the total compounded interest earned in five years, you\u2019ll have an additional RM12,999.17!<\/p>\n

On the other hand, if you withdraw from your retirement savings and you use it to reduce an outstanding loan where the compounding interest you have to pay is higher than what you would earn if you keep the money in your EPF savings, then it would make sense to do it.<\/p>\n

But don’t forget to pay yourself back what you took out of your EPF savings in the coming years because you will still need that money when you retire.<\/p>\n

<\/span>What you should know before withdrawing your savings<\/span><\/h2>\n

Besides i-Lestari and i-Sinar, EPF currently allows withdrawals based on these categories:<\/p>\n

\"\"<\/p>\n

Source: EPF Public Consultation Survey 2020<\/h6>\n

Most of the non-retirement withdrawals allowed are from Account 2 while the money in Account 1 is really intended for use only when you reach retirement age with only death, total disability or leaving the country for good as the only exceptions.<\/p>\n

The money in your retirement savings should be for the purpose of getting you through your entire retirement. So, what would justify withdrawing it before you retire?<\/p>\n

There are times when withdrawing money from your retirement fund can prevent a financial disaster, like losing your home, your insurance coverage or compounding high interest debts.<\/p>\n

Before you tap into your retirement funds, ask yourself:<\/p>\n