EPF was started for the sole purpose of forcing employees to set aside a certain percentage of their income for their retirement. It was generally perceived that if the contributions were to be used for other purposes, this would have a detrimental impact on the size of the retirement nest egg.
However, using these contributions to finance outstanding housing loans is also another form of long term saving as the property is likely to appreciate after the mortgage is settled.
How Does Withdrawing EPF Affect Your Retirement Fund?
If contributors withdraw their EPF for housing purposes, they will in turn have fewer funds for their retirement. However, at least they can be sure that they have roof to live under. For now, property is affordable in Malaysia, but one never knows what will happen to the property market in the future. Looking at Korea and Taiwan, it is almost impossible to own a home at big city if you are not rich.
The move to allow withdrawal of EPF to finance housing loans is a new one, which would benefit about five million active EPF contributors. Contributors who previously found it monetarily tight to buy a property can now consider doing so with this new withdrawal scheme.
This way, some contributors would be able to own better houses and yet be able to lessen their monthly financial obligations.
Contributors who are currently homeowners and are paying mortgage can also experience better cash flow as less money is spent out of hand for the loan.
This new withdrawal scheme is also good for those who know how to manage money. They can use this facility to grow their wealth. For instance, consumer debt in the form of credit card loans, personal loan can be paid off; they can invest for better return or even fund higher education.
However, for those who are financially illiterate, more money equals more trouble. They will spend for instant gratification without thinking of future needs. This may cause a social problem in the future when retiree has inadequate funds to live on.
Suggestions to channel EPF back to your retirement fund
Since you are reading this blog, I bet that you are amongst those who want to take advantage of this withdrawal facility and grow your retirement further. Here are 5 suggestions to channel your EPF money back to your retirement fund:
1. BUY UNIT TRUST FUND that will outperform EPF (5% currently) – by applying rinngit cost averaging strategy2. Pay towards the principle of your housing loan, thus shorten the loan tenure and save on interest charge.
mdsulaiman1@yahoo.com.my
013-7556776
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