This article was firstly published on SmartInvestor on 15th December 2020.
Since the beginning of movement control order (MCO) in Malaysia, we’ve seen how the Covid-19 pandemic has affected countless individuals and businesses. The government has done their part to inject assistance and stimulus, and there’s also been the enabling of EPF Account 2 withdrawals via iLestari, which has now been expanded to Account 1 via iSinar.
From the perspective of a working professional, I understand why industry leaders are discouraging Malaysians not to withdraw their retirement savings. However, from the perspective of a layman, if withdrawal means I can ensure my family will have a roof over our heads, meals on the table, education and other basic necessities taken care of, why not right? After all, it’s my money anyway.
Whether you are considering to withdraw or not, here are four tips to help you navigate these trying times:
Review your cash flow and debt
Sort your debt from those with the highest rate of interest down to the lowest. If credit card debt at 18% interest yearly is weighing you down, speak to the bank about converting the credit card debt to a term loan. If you have another credit card that you’re not using, consider doing a balance transfer and split the payment to a maximum of 12-month instalments. Calculate and see which works best for you and your cash flow situation. Either way, it’s still a better option than being stuck as you’ll pay less than the default 18% interest yearly.
Maximise the returns of your EPF withdrawals and savings
Do a forecast from January to June 2021 to see how much you are short of. Trim the expenses you don’t need. If there’s a surplus from the EPF withdrawals or other savings, reinvest the funds back into investment platforms that yield a higher return on average than what you can expect from the EPF. Always make your money work for you. However, if this is not an option, do leave your retirement funds in your EPF account as their average returns are still much better than fixed deposit and savings accounts.
Get a professional financial planner to help you
There are over 1,000 licensed financial planners in Malaysia. It might be prudent to reach out and see how they can help you with your financial dilemmas. Sometimes, viewing an issue through the lens of a third party can give you alternative perspectives that you may not have thought about previously. If you do decide to withdraw from your EPF Account 1, be sure to work out a plan to replenish the amount you have taken, instead of just waiting for future salary deductions to do the job.
Innovate and create
Tap into your inner strength and discover your talents. Turn it into a side hustle and create additional sources of income. Withdrawing your life or retirement savings should not be the only strategy for survival. A pilot I know is now a Certified KonMari Consultant, while an oil and gas practitioner has turned to freelance copywriting. What about you?
Covid-19 has shown us that things we used to take for granted can change in the blink of an eye. What used to work has now been replaced by the new normal. Perhaps this is the season to recalibrate ourselves and enter the season of transformation. Trust that the pain we are all going through has a purpose and allow the wisdom to guide us towards a breakthrough. You will survive this. Have faith.