EPF i-Sinar - The pros and cons of withdrawing money from EPF Account 1

Beginning January 2021; EPF contributors are allow to withdraw money up to RM60,000 from Account 1 via the i-Sinar facility

Purpose of i-Sinar - to help those who have been impacted by the prolonged pandemic to make ends meet.

• The Pros of Withdrawing 

1. "Helping" cash - With the i-Sinar facility, contributors will be able to lesser the financial constrain for up to six months (can be used as a top-up for the daily expenses such as food, house rent and  transportation etc)
2. Help boost the economy - it can help to further accelerate the economic recovery because as people have more cash in hand, they will spend to maintain their basic needs. This will then accelerate business activities as the will be demand for goods and services.

• The Cons of Withdrawing 

1. Reduced retirement fund

 take this situation as an example:

• Mr. Y currently has RM20,000 in his EPF savings account
• His monthly EPF contributions:
  • 9% (new contribution rate in 2021) x RM1,680 = RM151.20.
  • In a year, he’ll get RM1,814.40.
  • Assuming a 5% dividend and his salary remains the same, his retirement savings will be this much in 3 years

No.of Years	Current Retirement Savings	Annual Contribution	Dividends Earned	Retirement Savings After A Year
1	RM20,000	RM1,814.40	RM1,090.72	RM22,905.12
2	RM22,905.12	RM1,814.40	RM1,235.98	RM25,995.50
3	RM25,995.50	RM1,814.40	RM1,390.50	RM29,200.40

However, if he decided to withdraw RM10,000 from EPF Account 1, here’s how his retirement savings will look like:

No.of Years	Current Retirement Savings	Annual Contribution	Dividends Earned	Retirement Savings After A Year
1	RM10,000	RM1,814.40	RM590.72	RM12,405.12
2	RM12,405.12	RM1,814.40	RM710.98	RM14,930.50
3	RM14,930.50	RM1,814.40	RM837.25	RM17,582.15

        2. i-Sinar withdrawal will need to pay it back.

Unlike i-Lestari, i-Sinar works as an advancement instead of a withdrawal facility. In a way, it’s like taking out money from your savings – eventually, you’ll be putting it back. 

Before this, 70% of your contribution will go to Account 1 and another 30% to Account 2. If you were to opt for i-Sinar, 100% of your EPF contributions will go to Account 1 until the advancement is paid back fully. Once that’s sorted, the contributions will go back to normal.

***source from iProperty.com.my