Be careful on EPF withrawal

Many people fail to understand that EPF is a retirement fund; the funds that you need after you stop working at old age. In that sense, it should only be utilized at that time for retirement purpose. There are many articles flying around on the internets saying that the government is misusing the EPF fund and thus urging the contributors to withdraw the money from EPF and invest it in various types of mutual funds permitted by EPF in order to get a better return. 

I did the same thing a few years ago and recently when I received a quarterly statement from the mutual fund company that I invested in, I was pleased to see that the fund has grown some 40% over the capital that I withdrew over the years. 40%, not so bad isn’t it but bear in mind, if the share market goes upside down due to whatsoever reasons, the fund may potentially go kaput, and that is the inherent risk of withdrawing money from EPF for investment purposes. 

Unless you are thinking that this country is going bankrupt within your lifetime, your EPF fund should be kept intact in the Institution until such time that allow you to enjoy your retirement. Even though the dividends given over the years are nothing to shout about, ranging from 3 to 6% but don’t forget the compounding effect that the fund will generate and its snowballing effect. I was especially excited to see the amount of money generated from the 6% dividend declared by EPF recently, and as the fund growing bigger with years, even at 5 to 6% dividend will churn out quite a handsome amount of money. 

Wage earners should be especially careful on the withdrawal of EPF as our savings are limited and unless you job-hopping very frequently for a better salary or getting promotions faster than normal people, you can just expect a meager of increment in your salary from year to year. Whether or not our annual increment is sufficient to cope with the inflation is another issue. 

You will notice that a lot of people still continue working after retirement not for the sake of enjoyment but because they need money due to insufficient retirement fund.