EPF has recently announced a Special Withdrawal facility effective 1st April 2022. As of my writing, there are not many details announced yet on the procedure but members below age 55 can withdraw as low as RM50 & up to a maximum of RM10,000. Members are required to utilize their EPF Account 2 before accessing their Account 1.
Since the beginning of the pandemic, there are multiple withdrawals that was allowed by the government under the program of i-Lestari, i-Sinar & i-Citra. Under this program, RM1.01 billion was withdrawn by 7.34 million contributors collectively. In a good way, the withdrawals have eased the burden of many Malaysians at that point, especially those who lost their jobs or had their income affected by the pandemic. We can’t deny that the pandemic has affected the income streams of many. Thankfully, for now, things are slowly recovering as we are approaching an endemic.
Upon the announcement of EPF withdrawals, I’ve seen some debate between 2 parties on their view that has caught my eye. In summary, someone on Facebook was posting how much RM10,000 can be made with 5% compounding interest over the next 10 years. Based on that formula, if you decide to retain that RM10,000 & allow compounding interest to do its job, you will earn:
Another party brought up that not everyone wants to withdraw their life savings unless they truly need it. RM10,000 may not mean a lot to some people but they do mean a lot to some, especially during these tough times. Come to think about it, it is true in certain ways. EPF withdrawals can be abused by some people by using certain loopholes to gain quick money but at the same time, they can be truly helpful to those in need. It has been 2 years since we are in this situation, by now, most of us have already adapted to this whole situation in terms of our finances. Those who lost jobs or have lost income may already sort this out since it has been over 2 years since we are facing this issue. No doubt times are tough during that time but I bet that most of us are recovering from it. 3 types of EPF withdrawals later, ask yourself, do you really need the 4th withdrawal to survive the current situation? If yes, you are strongly encouraged to withdraw your EPF savings. If not, you can choose to maintain it to enjoy the yearly compounding interest.
There are also other groups that withdraw their EPF savings to invest in other investments which can be also a good idea provided if you are confident that you are able to make a higher return compared to EPF’s annual return. Or else, it is best for you to keep your EPF savings & only withdraw them when you retire. It is a safe retirement nest egg to many Malaysians but you should not rely 100% on your EPF savings as well. You can read more on my previous post Is Your EPF Enough For Your Retirement to learn more.
Before you fully decide to withdraw your EPF savings under the new special withdrawals, you may ask yourself these questions:
1. Why do you need to withdraw your EPF savings?
2. What will be the impact if you decide to keep it in EPF vs withdrawing it?
Those simple questions will definitely help you to decide whether you should or should not withdraw it.
OSS!
You can also check out my latest YouTube video on How To Invest Like Warren Buffett:
