‘Should I withdraw my RM 10,000 from EPF?’ I am sure this thought crossed your mind when our Prime Minister announced it recently. In fact, you probably read on social media and forums where people are debating whether they should or should not withdraw their EPF RM 10,000. So Warning! Read this first before withdrawing your EPF RM 10,000. You may want to consider this perspective using these 3 questions
What is good for you may not be good for others. ‘Beauty is in the Eyes of the Beholder’. The example I like to give is, I like to eat durian, but not everyone has the same liking as me. So the same principles apply to money and wealth. What others are investing in, may not be suitable for my situation. When others are withdrawing RM 10K from their EPF, it may not have the same benefit if YOU were to follow as well. So how do you know? You need certain ‘TOOLS’ to ‘SEE’ your current situation
I have a student, every month who is short of RM 2,000 due to a pay cut he got since MCO. He shared with me that he is still employed. But he is not getting a salary. I ask “How is this possible?”. Later I found out that he is still being employed as a Pilot but he is getting a pay cut until the airline has passengers to fly again. In this scenario, you may want to ask ‘Is it important for him to withdraw his EPF to sustain his livelihood?’ A better question I like to ask is – “Are there better options to sustain his livelihood before digging into his EPF savings?’
This year, EPF declared a 6.1% dividend for 2021 and this represents a 3X return compared to our Fixed Deposit rates. (using a 12 month FD rate at 1.6%). A common question I get from my clients will be “Why not put more money into EPF since they are giving such high returns?”
In fact, this is a very well asked question.
Do you know that there is a limit of RM 60,000 you can deposit per year ‘maximum’ for adhoc deposits? Meaning EPF knows their returns are so favourable that they fixed a ‘maximum’ amount Malaysians can put into EPF. Smart investors know that you would want to take advantage of an investment vehicle that you can earn passively on a consistent basis without putting your active time into it.
It is true that we can find higher returns compared to EPF. Unit Trust and stocks can give a higher return than 5- 6%. But ‘Can those investments give a consistent return for 10/20/30 years without you actively needing to manage it?’
Which leads me to the next question? Even if you can find an investment that gives you 8 – 10% yearly return for 10/20/30 years, ‘Can you guarantee you would have the discipline to ‘not touch’ the money/profits generated?’ Do you know that by spending a certain amount of profit, you mess with the overall compounded return in the later years?
Let me share with you the effects of it, to easily understand it.
Recently I found out my client Esther (not her real name), was so happy she was 1 of the 1586 female millionaires in the 40-44 age group. When I X-ray into what she did well, I notice it came back to the formula I was sharing with you guys earlier.
She says she is lucky to be in a Managerial position at a Multi-National IT company. She’s got a good habit of saving at least 30% of her 5 figure income although she has to support 2 kids (1 of the child needs special attention). She doesn’t have the support of her husband as they have been separated. But this didn’t derail her from reaching her goal. She’s not a great investor. In fact, she is so conservative that EPF is her biggest investment so far.
By allowing the money and returns from the dividends to compound, she hit the RM 1 Mil EPF savings by the age of 44. And she still has a good 10-15 years she can work before retiring. If she was allowed to ‘withdraw’ her EPF savings through i-Citra and all the other i’s, do you think she still can hit her RM 1 Mil savings at age of 44?’
So you see ‘Wealth is something you can’t see with your eyes, but with your mind’. This is a quote I truly resonate with. It is true for me because a lot of times when I teach in class, my students have a hard time ‘seeing’ what I am saying. You need the ‘TOOLS’ to capture so that you can ‘SEE’ your ‘WEALTH’ with your ‘naked’ eye. No, I am not talking about the big car and the big house.
So how do you capture and see ‘Wealth’? How do I make the ‘right’ decision on whether to withdraw my EPF RM 10K?
You can start here first –
So there you go, I hope this process helps you simplify your money making decisions without having to use your ‘gut-feel’. Feel free to reach out to me, if you still can’t ‘SEE’ it. I will be happy to answer your queries.
P.s Next week, I will share with you a question Esther ask me “How to compare and determine whether a 6.88% FD structured product is really giving me that kind of return?” Are you curious, is it an illusion or is it the REAL deal? Share this post with those you know are keen.