Should those who took advantage of the EPF’s special withdrawal scheme only spend the money on daily necessities? – Filepic
MANY of us became a little “richer” recently, thanks to the Employees Provident Fund’s (EPF) special withdrawal scheme.
The scheme was the fourth and reportedly, final one in a series of withdrawals announced by the government to help EPF contributors overcome economic hardship brought on by the Covid-19 pandemic.
When the announcement was made in March, there was much debate as to whether those below 55 should take out money meant for their retirement.
Applications for the scheme opened on April 1 and as of April 14, 5.3 million or 44% of EPF members had applied to withdraw up to RM10,000.
The window closed on April 30 and the total number of applications has yet to be reported.
Many who opted to withdraw some of their EPF funds were guilt-tripped by others who claimed that they would regret it in their senior years as the money would have multiplied if they hadn’t.
Were those 5.3 million people truly in dire need of money?
According to EPF, the top three reasons for withdrawals were reduction in income/wage (24%), to assist affected spouse/ family members (23%) and to increase sources of income (14%).
The applicants stated that the money would be used to help cover essential daily/monthly expenditure (40%), settle outstanding debts (26%), increase emergency funds (8%), and assist affected family members (7%).
The remaining 19% gave other reasons, such as paying for their children’s education, non-essential expenditure and investment.
An employee of a non-governmental organisation working with underprivileged communities, estimated that it would take the badly hit B40 group five to seven years to get back on their feet.
This individual called on the Malaysian public to stop judging those who wanted to withdraw their EPF money and let them decide what was best for themselves.
“After all, it is their money and there is no guarantee that everyone will live long enough to enjoy their retirement savings.
“Surely, those who withdrew the money will continue to work and build back their EPF savings,” the person said.
The discussion led me to think about the best use of EPF money.
Should one use it only to settle debts and buy groceries?
Can it be used to purchase an ergonomic desk and chair and move out from one’s makeshift bedroom workstation to a more comfortable setup?
A conducive working environment can translate to better productivity, which may be rewarded with higher remuneration.
So to me, both should be acceptable because different people have different struggles and as such, to each their own.
Yes, if the money was untouched, it may double eventually but it is also important that one lives well in the present moment.
What is not acceptable is using the money to go for a holiday or splurge on luxuries.
As much as travel is good for mental health, there are cheaper recreational alternatives available that could be explored.
Similarly, buying a smartphone is okay to replace a broken one but there is no need to get the latest model in the market, which is likely to be very expensive.
I am not totally against splurging but as a rule of thumb, I will only do so if the item is something that can be used often, helps me in my day-to-day life and promotes my well-being; like a good pair of shoes.
To me, a good pair of shoes is essential though one must refrain from buying a second pair with the EPF money because that is no longer considered a necessity.
I also know of some people who have plans to use the money for home improvements.
Replacing termite-infested kitchen cabinets is okay, but not building a patio for your afternoon tea.
As much as it is important to save, it is also wise to spend only on what is necessary.
Having said that, it should be noted that the Malaysian Financial Planning Council (MFPC) had warned people against the withdrawals, citing bigger problems in the future for retirees.
Last year, EPF chief strategy officer Nurhisham Hussein was quoted as saying at present, only an estimated 3% of its contributors could afford to retire comfortably.
MFPC attributes this low figure to poor financial literacy among Malaysians.
Malaysia’s National Strategy for Financial Literacy 2019-2023 has recommended a minimum of RM240,000 basic savings at 55 to allow the withdrawal of RM1,000 per month for the next 20 years.
It is too late to reconsider your EPF withdrawal but it is never too late to learn good financial habits.
I hope that those who have withdrawn their EPF money will use it wisely and work towards building their retirement savings back up again.
