EPF Akaun Fleksibel: How much would a typical B40/M40 lose if it is fully withdrawn?
As EPF’s Akaun Fleksibel (Flexible Account) garners more traction, I can’t help but wonder what is the ultimate price one could be paying if it’s fully withdrawn.
Thankfully with Excel and readily available information, it is easy to come out with a simple projection.
I set a few constant factors to run a basic simulation and projection. Below are the constants:
- The simulation starts at age 25 and ends at age 55 (an age when you can withdraw everything)
- Increment of 5% per annum
- EPF’s long-term return of 6% per annum.
- EPF contribution of 23% (employee + employer) when monthly pay hits more than RM5k per month at age 40.
- Salary increment freezes at age 49 onwards as old age sets in.
Before we get to the juicy part, I will spend a few paragraphs justifying the constant set.
Setting some constants and assumption
Here is some basis that justifies the constants and assumption setting.
Plenty of sources provide an estimate of 5% per annum for average increment per annum.
As for starting age and pay, let’s set an age of 25 years old and a starting pay of MYR 2,500 per month.
This plain Joe will get a consistent 5% increment from the age he or she starts working until 40 years old, when it breaches more than MYR 5,000 per month.
His or her EPF contribution from the employer drops from 13% to 12% due to that, and this continues until the age of 49 when he no longer experiences salary increment as he reaches the tail end of his working career.
I would guess that this applies to 80% of the total Malaysian population, encompassing the B40 and M40 categories.
How much will you be getting if you do not touch a single cent from Akaun Fleksibel
Ever wondered how much everything adds up should you choose not to withdraw a single cent?
The amount is substantial.
| Total amount for Account Fleksibel if remained untouched by age 55 | MYR 97,299 |
| Total contributed forced savings for Account Fleksibel by 55 years old | MYR 35,642 |
| Total accrued returns from Account Flexible by 55 years old | MYR 61,657 |
10% forced contributions that funnel into Akaun Fleksibel come out at MYR 35,642 for 30 years of work.
With a 6% compounded return across 30 years, you will get an extra MYR 61,657 of dividend returns for the whole period.
Thus, by the age of 55, you will be having an extra MYR 97,299, if you did not touch a single cent of your Akaun Fleksibel.
And that amount easily breaches MYR 100k by age 56. And more should you choose not to touch it.
Better to have a quarter or mid-life crisis than a retirement crisis
The quantum of not having an additional MYR 100k by the time one retires is subjective.
But if we argue from a B40 and M40 perspective, it is not a small amount. Of course, the above simulation applies to an individual who eventually turns out to be a T20 due to a salary increment, and having a working spouse who earns almost the same amount easily qualifies them as a T20 from a household point of view.
But that sets a baseline of assumption for most typical Malaysians, especially those living in cities like Kuala Lumpur, Penang and Johore Bahru.
Yes, life can be tough, and I believe everyone would have their own quarter and mid-life crisis. Most will stem from a financial perspective. The inception of the possibility to withdraw a portion of EPF, long regarded as the basic holy grail for retirement has manifested even post-COVID where it becomes a demand rather than a need.
Well, you can argue that everyone’s needs and dire situations differ. But somehow I feel the lack of sufficient pay, and poor career, financial and family planning, have led to this escalation.
It is not wrong for someone to have the freedom, flexibility and right to use 10% of their savings deemed for retirement to survive and live on.
But it’s such a shame, that Malaysians have reached such a stage, where they are so financially tight, that 10% of a golden goose needs to be sacrificed to make ends meet.
If it’s for survival, then so be it. But if it’s just for the sake of having more excess to cash to needless spending, you will be losing out on an additional 6 figure savings.
You do what you do best, as I have done mine coming out with this piece of article.
