Special withdrawals can be made from EPF of up to RM10K for members below the age of 55 from April 1 until 30. While many financial advisors and even the government have reiterated the crucial point that this withdrawal are for those EPF members who are in dire need of the money for those in very tight financial situations to meet daily necessities after the effects of pandemic and flood on the economy and job market.
There are those who do not fall into the above-mentioned category. But what justifies a good reason to withdraw RM10K from your retirement fund?
How about for emergency reserve?
To be frank, given the reports on the low level of savings of average Malaysians. Many of us actually do not have a saving for unforeseen circumstances like an medical emergency, natural disaster, and the like. Instead of using EPF withdrawal, is there other way to address the urgency and emergency? Look first into other sources of funding such as seeking help from family members, cash values of insurance policies that can be withdrawn anytime. But the most valid piece of advice is by setting your emergency fund through side hustles or a job switch. But if you are in a desperate situation and have no choice, then you may use EPF funds for an emergency reserve.
Investment (or speculation)?
Some of us with a more ambitious way may want withdraw the RM10K to invest in other places that could provide them with higher interest rates, such as stocks, and mutual funds as compared to the average returns of EPF, which is approximately 6.1%. However, the success of investments is dependent on how savvy and experienced the investor is. Those planning to make such a move should do their own research first, before making any investment decisions. Investment in stocks should be angled on those companies with sound fundamentals and good prospects coupled with good management.
Some may think of investing (or speculating) in cryptocurrency. The European Union’s securities, banking and insurance watchdogs warned the crypto investors, “be ready to lose all your money in crypto” in March 2022. Therefore, think twice when you want to put your hard-earned money in this.
Other financial tools like futures, options? Again, unless you are a very seasoned investor then you might consider financial tools with leverage. High risk, high returns. But can you stomach the losses in a worst case scenario?
ETF? Again there are many types of ETFs out there. Always have a thorough study and research on the range of ETFs and which are the suitable for your risk profile, investment goals and objectives.
People may be better off to be reminded about the concept of compounded interest rate. The more you have in EPF, the bigger slice of the returns of interest you will get. Furthermore, it is extremely difficult to find something low risk like the EPF that still gives you good returns every year. Perhaps it is best to ask yourself whether you are savvy enough to get high returns consistently, year after year, for 10 years? Consider also opportunity cost and compounded interest factors when you make the withdrawal.
For business capital?
Or, first look into businesses that you can start with little capital and learn to market and sell your services first. Work from zero toward the goals. Try not to breach the EPF saving if possible. This is a discipline as well as a determination.
If the EPF money is your last resort to fund the business, then practice this and you will thank yourself for the determination and the discipline you got i.e. as soon as you make that RM10k, replenish the amount in the EPF account! Or, you may contemplate other ways of of getting funding, which may include equity crowdfunding, finding angel investors etc. Do some research and explore.
For a downpayment?
Plan and start to save towards the downpayment. It is advisable to rent while you save up for your own home. Bankers’ advice would be this, you should prepare a financial buffer for buying long-term assets by triple the instalment payments. If you can’t afford that amount every month simply means you can’t afford it.
