Beware! EPF savings is really not a lot when we do these calculations

Beware! EPF savings is really not a lot when we do these calculations

EPF has over 9 million active contributors. One day, these 9 million contributors will stop working. They could have reached the RM390,000 milestone by EPF, maybe more than RM390,000 or they could have a lot more, say over RM1 million. As of December 31, 2024, the top 1% of active Employees Provident Fund (EPF) members consist of approximately 108,701 individuals with savings of at least RM1 million. (Info source: The Edge Malaysia)

When someone retires and realized they have hundreds of thousands in their EPF which is suddenly theirs to use, what do you think could happen? Well, they could spend it wisely and stretch it sufficiently to cover for the next 15-20 years of their retirement life. Or they could spend it very quickly to buy things which they could not afford previously. Or maybe they could be scammed by someone and lose it all too.

Here are two news which are very sad when it happens to retirees.

Here are 5 things to beware of/ be aware of when we have a big EPF amount

#1 – It’s NOT a LOT if we think it’s a LOT

For those who think RM1 million is a lot of money, well, this amount has to be spent over 20 years and that’s 120 months and thus it’s just RM4,167 per month. Suddenly it does not seem to be a lot right? In case one is thinking to reward themselves with say a new proper Japanese branded car will realize that after deducting for that nice car, this amount shrinks to 2/3 yeah. Here’s one proper Japanese branded car. Minimum Segment C lah. Honda Civic.

My brother-in-law drives one and yes, it’s a very good car. Refined, Powerful and Looks Good from the outside too. Cheapest version is RM133,000.

Let’s look at how much is the repayment per month for a 5-year car loan.

RM4,167 per month which we have after deduction of RM2,194 will give us a remaining amount of RM1,973. This does not yet include petrol, toll, maintenance and of course our daily meals. I do hope this is clear to everyone that if we have RM1 million and we spend it as if we have a lot of money, then truth is, we do not have enough yeah.

#2 – It’s a LOT more if we spend wisely

How about this car option then? Smaller, less powerful and carries a logo which people see as ‘affordable’ category. Proton Saga 1.5

Power wise, its horsepower is higher than the Vios and Almera. It’s similar to the City. So, this is not really that bad as an option. The repayment is however way lower. We use back 5 years but increased the interest rate to 3 percent since the lower the car price, the interest rate is usually higher.

Using RM4,167 per month, after deducting RM672 per month, we will have a remaining amount of RM3,495. This is indeed a way better number because now we have over RM100 per day to spend on all other things including petrol, toll, maintenance and of course our daily meals. So, if we really do spend it wisely, suddenly we can stretch the money we have and we could have more money to spend on all other things too.

#3 – All these calculations assume we already have a full paid home

If we do not have a fully paid home because we listened to all the amazing personal finance experts when we were younger, we will soon realize that paying rental is a lot of money when our income is based on EPF and not our monthly salary. All the above calculations will suddenly be meaningless or maybe just forego the new car and just continue to drive the same car we have? Well, it could well be a choice of paying rental (and be at the mercy of the homeowner) or owning a fully paid place and driving a new car.

Happy deciding.

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