EPF alone is definitely not enough, BEWARE

I just read an article about EPF encouraging people to save as early and as much as they can. Truth is, every employee provident funds or equivalents in all countries are saying the same and this is not just applicable for EPF of Malaysia. Most of the time, the usual recommendation is to save a third of one’s monthly earnings. If we are working full time and when we add the contributions from the employer as well as our own deductions every month, the total comes to around 23 percent or 24 percent. Let’s assume the EPF’s yearly dividend is always above inflation. In other words, when we retire and we live another 20 years, our money in EPF should give us around or at least 23 percent of our monthly pay every month until the day we say bye-bye. Is this enough to sustain our lifestyle then?

Actually the answer depends, really. Besides EPF, most of us should have some personal savings. The luckier ones would have children who should be able to also provide some monthly allowances. The prudent ones might have one property which has been fully paid for. The slightly far-sighted ones would have two properties fully paid for. Even assuming an average property price of just RM500,000 then, this is RM1 million. Considering everyone lives another 20 years, this RM1 million would provide an additional RM4,166per month. As long as the last group did not simply spend, the total from EPF, some personal savings and the two fully paid properties is enough to sustain their lifestyle as long as they do not go on vacations every week.

I am very sure, many would now argue that the inflation is going to chip away a lot of the money or the current belief is that Ringgit’s devaluation would be continuing and all of us would die of starvation because we could not afford imported food. Please, go and take a look at the exchange rate of RM vs Yen over at least past 15 years. If because of the current devaluation, all Malaysians would die of starvation, I do not know how to explain why Japanese are still quite okay today. By the way, for those who are lazy to check, the actual difference is negligible. Yes, I think we may want to read more about investment and not simply listen to some Facebook comments and make a decision to rent since Malaysia is going bankrupt soon. 🙂

Oh yeah, coming back to start saving as young as possible. Hence, in whatever we do, starting as young as possible is always the best. This applies even if we are buying an undervalued stock or even unit trust or REITs. Besides that, getting a home loan with a 40 year repayment period is a HUGE difference compared to one with a 20 year repayment period. I do not wish to even talk about those arguing that if we were to take a 40-year loan, the total interest paid at the end is MUCH higher. Truth is, the extra savings per month that I have from a lower repayment, I can easily use it for other investments which may provide for MUCH MUCH higher returns. If we could not control how we use this extra amount and would use it for useless stuffs like an iPhone, then yes taking a 20-year home loan is MUCH better than a 40-year one. Haha. Yes, I am still using my mid-range OPPO phone for the past 1 year and 9 months.

Okay, final conclusion is what everyone already know. EPF savings alone is not enough. Since we already know, the next step is crucial. Do we still enjoy as if there’s no tomorrow since everyone is saying live life to the maximum? Or do we enjoy responsibly so that we can enjoy more comfortably in future, when we have less money? No right or wrong. It’s our lives and it’s our right to enjoy it the way we want. Happy enjoying.

written on 2 Dec 2015

Net suggested article: I am not using my EPF for unit trust. My view.

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