How much can I invest from my EPF?

Below is the formula to calculate the amount that you are eligible to withdraw

Amount Eligible to withdraw = (Account 1 - Basic Savings) x 20%

The table below shows the Basic Savings at various ages:

Example 1: John has RM100,000 in account 1 and he is 30 year old now, calculate the 1st, 2nd and 3rd withdrawal amount assuming that John contributes RM3,000 to his account 1 every month.

1st withdraw = (100,000 - 18,000) x 20% = 82,000 x 20% = RM16,400

New Account 1 Balance after 1st withdraw = 100,000 - 16,400 = 83,600

Account 1 Balance after 3 months = 83,600 + (3 x 3,000) = 92,600
2nd withdraw = (92,600 - 18,000) x 20% = 82,000 x 20% = RM14,920
New Account 1 Balance after 2nd withdraw = 92,600 - 14,920 = 77,680
Account 1 Balance after 3 months = 77,680 + (3 x 3,000) = 86,680

3rd withdraw = (86,680 - 18,000) x 20% = 68,680 x 20% = RM13,736
Investor can continue to withdraw from EPF account 1 as long as his account 1 balance is more than basic savings for his age.

Why should I invest with my EPF?

Let's have a look at EPF dividend rates for the past 5 years, it has been in the region of 4++% to 5++% for the pass 5 years, in fact for the past 10 years, the rate has been hovering around the same region.

Dividend Rates

Source: EPF Website

No doubt, the EPF dividend is much better than fixed deposit rate, however, it may not be able to beat inflation rate, if you want to know more, you may read my post Why should we invest and get more than 5% per annum?

In another perspective, it is perhaps unfortunate that for most of us, EPF savings is probably our biggest savings, and if you are comfortable with relying solely on your EPF savings for your retirement, do read my post A quick way to estimate how long my EPF fund can last?

If you understand that you need to make your money work harder, welcome to the club :D

How much can we expect to gain by investing using our EPF fund into Unit Trust?

Assuming that you are able to withdraw RM100,000 from your EPF account 1 in stages and you are at age 35, and your investment can clock 10% or 12% per annum, the table below shows the difference

Capital: RM100,000
Age	EPF (5%)	Investment (10%)	Investment (12%)
40	127,628	161,051	176,234
45	162,889	259,374	310,585
50	207,893	417,724	547,357
55	265,330	672,750	964,629
60	338,635	1,083,471	1,700,006

To find out the amount you are eligible to invest through EPF account 1, please refer to my post "How much can I invest from my EPF?"

A quick way to estimate how long my EPF can last?

It is very unfortunate that not many Malaysians including myself have a million in our EPF account when we retire yet we need about million if they would like to retire in the same lifestyle. Thus, many whom i speak to either continue to work (get a part time job) or forced to change their lifestyle, living within their means. Is that what we want in our retirement?
I find the following very useful when i want to quickly demonstrate to my friends that their EPF would run dry very quickly. Here is how

Assuming that i have RM300,000 in my EPF account 1 and my current monthly expenses is RM5,000, how long would my EPF last if i'm retiring with the same lifestyle? Now 300k seems to be quite a big sum right? Let see...


Annual Living Expenses = RM5,000 x 12 = RM60,000
Number of years to finish spending my EPF savings = RM300,000 / RM60,000 = 5 years
Imagine that we are 55 and finally realized that EPF savings could only last a few years, how else could we coupe? Do a part time job? Depending on our children?

How much do I need for my RETIREMENT?

Knowing how much you need for your retirement is the first step in retirement planning, your first step to financial success!

You can use some of the online calculators below to estimate your retirement needs or if you are interested to learn how the calculation works (in the case where you want to share this with your friends), i'll take you through here.


My Retirement Needs

1. Find out your Retirement Age (Think about when you would like to retire or become financial free, at what age)?

2. Find out your Monthly Expenses (Think about the lifestyle you want to enjoy when you retire, how much does that kind of lifestyle cost now on a monthly basis)?


Retirement Needs (RM) = Annual Expenses x Years in Retirement x Inflation factor

Annual Expenses = Monthly Expenses x 12
Years in Retirement = (75 - Retirement Age) i.e. Assuming that we are leaving to heaven at age 75
Inflation Factor := The Month Expenses is in today's monetary terms, we need to take inflation in the picture in order to get a more accurate number. Basically, in order to buy what you can buy with a ringgit today, you may need a ringgit fifty cents in 10 years to buy the same thing because of inflation. 


If you do not want to go through tedious calculation to get inflation factor and are okay to assume 5% inflation rate, use 1.63 as inflation factor if you are going to retire in 10 years, use 2.08 for 15 years, use 2.65 for 20 years, use 3.39 for 25 years, use 4.32 for 30 years. See below for the calculation.


Calculate Inflation Factor using simple calculator

You need two variables to calculate inflation factor

1) Inflation rate (assuming 5%)

2) Years to retirement = Retirement Age - Current Age (asssuming 20)

Step 1 = Key in '1' into a simple calculator, 
Step 2 = Key in '+', key in '5', key in '%'
Do step 2 for 20 times and press the '=' key to get inflation factor


CNN Retirement Needs Calculator

Prudential "What's Your Retirement Number" Calculator