Your Employees Provident Fund (EPF) Accounts

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Most of us who might have been slaving for the corporate sectors or in others words, if we have been making our bosses rich, we are most likely to have a KWSP Savings Account or more commonly referred to as EPF opened by our dear “majikan” (Employer). What most of us might not know is that how is our EPF Savings Account is being structured and how each of the structures can help us to better plan our “withdrawal”.

It’s not a good idea to really touch your EPF savings, unless you have a very good reason to, or if you have already in place an alternative retirement scheme.

For starter, our EPF account consists of 3 sub-accounts- mainly Account 1, Account 2 and Account 3. To briefly describe the purpose of these 3 accounts:-

Account 1: This one is a freezed-till-55 sub-account. Nobody’s to touch a single sen from this account. This is purely for your retirement purpose. However, there’s a clause which allows you to invest a portion of this account in an alternative investment fund managed by an approved Investment Management Fund. (I will cover this in a more detailed manner in the next post).

Account 2: This account is for Purchase- Things- I- Can’t- Afford- Otherwise. Basically it’s for House Ownership and Children’s Education Fund.

Account 3: This one’s a My- Medical- Expenses- Which- Is- Hardly- Enough- But- Better- Than- Nothing! sub-account.

When we make a monthly contribution to our EPF, say RM 1000, this is how it will be divided:

Account 1 - 60% which will be RM 600.00
Account 2 - 30% which will be RM 3o0.00
Account 3 - 10% which will be RM 100.00

So, as you can see, sometimes it’s not a very good thing to know that you can actually “withdraw” from your retirement plan, since that would have defeated the whole purpose of setting up a retirement account in the first place. However, if you are confident of setting up your own retirement scheme and most importantly, has the self-discipline to actually execute it, then, there’s no reason why you wouldn’t want to utilize these withdrawal facilities.

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