I REFER to the report “From FIRE to mere embers ” (The Star, Feb 2; online at https://bit.ly/3HRrROU), which highlighted the predicaments of Malaysians who are trying to achieve the “financial independence, retire early” (FIRE) ideal.
The topic is related to the issue of people who are now left with low retirement savings in the Employees Provident Fund (EPF). Many workers lost their jobs during the Covid-19 pandemic and took the opportunity offered by the government to withdraw money from their EPF savings.
In fact, a group is now calling on the government to approve another round of EPF withdrawals of up to RM30,000.
While it could be a matter of life and death for some, many others are also withdrawing their retirement savings prematurely simply because there is an opportunity to do so.
EPF savings should be left to accumulate over the entire working life of the contributors so that the money can benefit from the compounding effect. The compounding effect will be significant only if the amount saved has accumulated to a big sum after 10 to 15 years of contributions.
When the contributor’s EPF savings is large enough, the annual dividend coupled with yearly contributions will magnify the compounding effect.
Hence, to achieve FIRE, sacrifices are needed during the early stage of our working life. One needs to spend wisely so that their family is not overburdened by housing mortgage, car loan, personal loan and so on.
It’s a must for everybody to own a mobile phone nowadays, but there is no need to get a high-end model costing thousands of ringgit. Just get a basic model and save the balance in EPF through self-contribution.
Likewise, consider living in a cheaper house or driving an affordable car to free up extra money for retirement savings. There is no point in living a luxurious life at a young age and then struggling in old age when we are not capable of earning any income.
OOI SEONG WEI
Nilai, Negri Sembilan
