EPF News: RM7 billion today may be RM14 billion 12 years later
Many are withdrawing from EPF Account 3
Our EPF savings are now distributed into three accounts. The monthly contribution of members would be channelled to Accounts 1, 2 and 3 in the proportion of 75%, 15% and 10% respectively. In other words, if you earn RM5,000 and your company pays 12% into the EPF, the calculation would be as follows:
RM5,000 x 12 percent (employer) and 11% (employee) = RM1,150 total contributions into EPF
75% into Account 1 = RM862.50 15% into Account 2 = RM138 10% into Account 3 = RM115
After one year, this member would have RM115 x 12 months = RM1,380 which the member could withdraw anytime they needed the fund.
How many have actually withdrawn from Account 3?
Article in thestar.com.my A total of RM6.98bil has been withdrawn to date from the Employees Provident Fund (EPF) Account 3 (Flexible Account) by members below 55, the Dewan Rakyat was told.
The Finance Ministry said in a parliamentary written reply that the sum involved 2.93 million or 22.6% of EPF members below 55, at an average withdrawal of RM2,382.
It also said that as of June 10, a total of RM10.86bil had been transferred as an initial amount into the flexible account of 3.45 million members. Please do read the full article here: Article in thestar.com.my
How much can this RM6.98 billion become 12 years later?
I just use a simple calculator to show what happens if the same amount is kept in EPF Account 3 and EPF declares an income of 6 percent per year. Within 12 years, this amount would have doubled. In other words, if a member withdrew RM2,000 today, this amount would have been RM4,000 if left untouched instead by putting it back into Account 1 or Account 2. This is why there’s something called Time Value of Money. Money depreciates, basically.
Should we withdraw from EPF Account 3?
I cannot answer for everyone but if we do not need the money or are withdrawing for non-productive purposes, then it’s best NOT to withdraw. What we withdraw today will mean our future has lost 2x, maybe 3x depending on how long that amount was left in the EPF.
Then again, I have personal friends who said that they would invest and get higher returns than the 6 percent which I used as calculation. For all these friends, as long as they are confident and they are also aware of the potential risks, I would always wish them all the very best. Everyone should be allowed to invest their money the way they are most happy with. We should not be limiting them by stating all these factual numbers and then expecting everyone to toe the line. We are all humans after all.
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