PETALING JAYA: Malaysians who have to tap into their EPF Account 1 as a lifeline should replenish the fund by making ad hoc deposits in the future to ensure their retirement is not ruined, say financial experts.
They advised those affected to take on extra jobs and tighten their spending to repay EPF the amount they take out.
Licensed financial planner Rajen Devadason said the amount replenished should be at least 50% more than what was taken out to make up for the compounding interest.
“The total should be at least 50% more, or a minimum of RM15,000, between 2021 and 2023.
“EPF is the bedrock of many Malaysians’ retirement plans. That money is meant for their old age and should not be used prematurely, ” he said in an interview.
Devadason, the chief executive officer of a corporate mentoring consultancy, said the pandemic had made many poorer, requiring them to work twice as hard but earn half as much.
“If we do nothing about it, the pandemic will keep us permanently poorer for the rest of our lives because of the massive drop in income experienced this year, ” he said.
To compensate for the loss, he said Malaysians needed to put in place strategies to ensure their income accretion for the next few years compensated for the loss of income and wealth this year.
More importantly, he said the people should shift from looking to the government for help and focus on upskilling and reskilling themselves to boost their value.
Describing Malaysia’s official retirement age of 60 as low, Devadason said Malaysians who understood the need for long-term aggressive saving and investing should work well past 60.
“Many other countries’ official retirement ages today range from 62 to 68.
“With the whole world greying due to plummeting birth rates and lengthening lifespans, the longer we work past any nationally stipulated retirement age to continue earning a decent income, the shorter the retirement period we will need to fund in the future, ” he added.He also called on those still in good financial shape to maintain a higher statutory contribution to EPF to avert a shortfall later.
Financial adviser Cheryl Wee also urged the people to find other sources of income to replenish their savings for retirement.
“People need to build their savings for their old days as we can no longer depend on one source of income due to inflation and cost of living increasing dramatically every year, especially for those who are living in the city.
“I advise people to seek financial advisers and use appropriate financial tools to grow their money and plan for retirement, ” she said, adding that they could no longer rely only on fixed deposits as it offered only 1.75% per annum on average.
Once a person made withdrawals from the EPF account, they must adopt a “forced saving” method, she said.
“The EPF Account 1 is allocated for retirement funding and is not supposed to be taken out until you reach a certain age. But I do understand that the situation now may force people to resort to this as a last choice.
“There could be a lot of applications for withdrawal considering that many have lost their job during the pandemic, ” she said.
“I hope people are wise in making use of the money and adopt proper financial planning.”
Wee also said that those who had loans with high interest rates should negotiate the repayment with their bank.
“You can always discuss with the bank on the amount that you are willing to pay instead of just increasing your debt.
“It is better to pay smaller amounts even though it will take longer than not paying at all, ” she said.
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