EPF Flexible Account: 3.86 million members have less money for their future (compounded…)

EPF Flexible Account: 3.86 million members have less money for their future (compounded…)

Are we worried that we may not have enough money when we retire in the future? I personally think EPF money is for the time when we no longer have income. That’s why it’s best not to touch it unless it’s for emergency purposes. It was revealed recently by the Finance Ministry that we have 3.86 million members who have withdrawn a total of RM10.78 billion from the Flexible Account aka Account 3 in the EPF. Perhaps some of them needed it for emergency purposes.

Article in theedgemalaysia.com. A total of RM10.78 billion had been withdrawn from the Employees Provident Fund’s (EPF) Flexible Account (Account 3) as of the end of September, according to the Finance Ministry (MOF).

In a written parliamentary response to Wan Saiful Wan Jan (Perikatan Nasional-Tasek Gelugor), the MOF said that the withdrawals were made by 3.86 million EPF members, representing 29.4% of those below the age of 55.

To recap, the national retirement fund allowed members below 55 to withdraw money from the Flexible Account — a newly introduced account designed to meet members’ short-term financial needs — following a restructuring plan that took effect on May 11.

Under this restructuring, members’ contributions are now divided into a 75:15:10 ratio across Account 1 (Retirement Account), Account 2 (Sejahtera Account) and the Flexible Account respectively, replacing the previous 70:30 split between Account 1 and Account 2. Do read the full article here: Article in theedgemalaysia.com.

Short-Term Financial Needs versus long term potential compounded returns

For the valid reasons to withdraw from Flexible Account, I think the EPF member just need to know what they are doing. For those who are withdrawing to buy things, please remember that the RM1,000 which you withdraw today is more likely to be doubled, tripled by the time you retire due to compounded dividend returns. At 5 percent returns per year, the amount will double in just 14 years and another 14 years later, this doubled amount will double again. This is why it’s better to let the EPF funds remain the EPF funds and not become our short-term expenses fund. Especially if those expenses were not based on emergency purpose.

At this moment, I am just waiting for the announcement of a very healthy dividend from the EPF. No idea what will happen next year when Trump assumes Presidency but 2024 has been a good year thus far for the EPF. Read here: Higher Dividends Possible by the EPF for 2024.

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