Should You Withdraw From Account 3? Here Are Some Things To Consider Long Term
The introduction of EPF’s Account 3 has attracted negative views centered on the worry of people spending unscrupulously and diminishing their retirement savings.
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In 2022, the Employees Provident Fund (EPF) said Malaysians who plan to retire 20 to 30 years from now in comfort will need a nest fund between RM900,000 and RM1 million. The figures are just the “bare minimum” needed after accounting for inflation and medical expenses.
For a dignified retirement in Kuala Lumpur, EPF said Malaysians would need at least RM600,000 in their savings but this amount only covers basic outpatient medical visits and does not cover major treatment.
If we go by these numbers, netizens calculated that a person in their 30s would need to save at least RM3,000 a month to retire in their 60s. This poses a problem for those who earn less or a little more than RM3,000.
However, if they aim for a modest retirement in their 60s, an individual would need to save RM1,400 per month.
Will Account 3 help with this?
Refresher: EPF members can withdraw a minimum of RM50 from Account 3 aka Akaun Fleksibel at any time.
This also means if someone consistently withdraws from Account 3, their dividends will be lower than usual. The new structure means 10% of the contribution will go into Account 3, 15% into Account 2 (Akaun Sejahtera), and 75% into Account 1 (Akaun Persaraan).
READ MORE: Ready For EPF’s Account 3? Initial Amount Transfer Will Go Live 12 May
Before we can see the pros and cons of Account 3, it’s good to analyse EPF’s 2023 report.
Based on the report, the T20 group (20% of members) has an average savings of RM278,941 (82% of the total EPF Fund).
The M40 group (40% of members) has an average savings of RM28,032 (16% of the total fund) while the B40 group (40% of members) has an average savings of RM1,713 (2% of the total fund).
From here, we have the data that show that the affluent still find it easier to shore up money in EPF than lower-income folks.
It’s also important to note that EPF also allows self-contribution, which can significantly increase savings.
What about the average savings based on age group? Here’s the breakdown:
Age 25 to 29: RM16k
Age 30 to 34: RM35k
Age 35 to 39: RM61k
Age 40 to 44: RM89k
According to the Facebook page No to Yes, people who have savings above the average for their age based on the data above are in the “safe” zone.
However, those with savings below the average are advised not to touch or withdraw from Account 2 and Account 3.
The report also broke down the average savings based on race group which shows a correct representation of the country.
The Malays (60%) hold 30% of the EPF Fund, the Chinese (27%) hold 56%, the Indians (8%) hold 8%, and the Other Races (5%) hold 6%.
It must be noted that not everyone is an EPF member and many Malay people also save or invest their money in Tabung Haji and Amanah Saham Nasional Berhad (ASNB).
It’s down to individuals to manage their finances wisely
There’s no denying that having the option to withdraw from Account 3 will help some of us in dire need. The funds in Account 3 can help alleviate some financial burdens at the current time.
However, withdrawing the money to use also means less savings in the EPF account come retirement. To avoid falling into a financial nightmare, it’s down to each person’s responsibility to spend and save wisely.
The best option might be to transfer the funds in Account 3 to the other Accounts to increase savings. If not, leave Account 3 alone and only use the funds if you badly need to such as in emergencies.
You can also look into other ways to invest and grow your money.
READ MORE: Hey Gen Z! Want To Make Your Retirement Money Work For You? Here’s How
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