top of page
  • Writer's pictureMaung Marsha

Understanding Your EPF Contribution?

Employees Provident Fund (EPF), also known as KWSP, Kumpulan Wang Simpanan Pekerja di Malaysia, requires every employer in Malaysia to contribute a sum calculated based on the staff’s monthly wage into a fund management account run by the Federal Statutory body maintained by the Malaysian Ministry of Finance.

Contribution to the fund is mandatory for both Malaysian employers and employees in the private sector. For non-Malaysians and those who are self-employed, it is voluntary.

The purpose of EPF and the continued dissuasion towards early EPF withdrawal is to ensure that Malaysian workers have ample funds for their retirements. EPF withdrawal is allowed for special purposes only and you can read more about it here.

Many Malaysians Have No Other Savings Other Than EPF

Up to 26% of Malaysians reportedly have no other savings other than the money in their EPF accounts. To many, this is not a surprise at all.

Since employers are also required to chip in on the EPF savings as well, it works to the employees’ benefit. The employers’ contribution towards its employees’ EPF savings is also tax-deductible for up to 19% of the employee’s monthly salary.

As of 2020, the Malaysian Employees’ Provident Fund is the seventh-largest pension fund in the world.

Employees can withdraw a part of their EPF funds when they reach the age of 50 and their whole savings at the age of 55 or older.

Although EPF's aim is to have its members reach RM240,000 in savings by the time they retire, a large portion of the country's working community has less than RM50,000.

Malaysians May Want to Start their Own Small Business When they Retire

Many Malaysians prefer to continue working during retirement to continue contributing to the family and society. Living life to the fullest, to them, means keeping busy with work. However, with the money they get from their EPF retirement fund, this may not be possible.

Instead of resorting to informal loans in the market, they may approach neo-banks like INFT to get a business term loan to get their business off the ground. INFT’s business term loan aims at helping SMEs in Malaysia overcome the difficulty of funding their new ventures.

For example, Mr. Liew may have been working as an architect for the last 30 years of his life and during his retirement, he would like to run his own consulting firm. This would give him more freedom and control over his time and the way he would like to steer the business.

Getting to know your EPF Facts
Getting to know your EPF Facts

How Much Do You Need During Your Retirement

Don't make the mistake of investing in stocks or the latest not-to-be-missed arrangements that you are not familiar with. And even if you've got some money in your hands, consult with someone professional or experienced before going into something new.

That’s, perhaps why, shockingly, 70% of retirees spend all of their EPF savings within 10 years of withdrawing their money from EPF.

If you’re not sure how to plan your retirement, err on the side of caution. Estimate realistically how much you really need to spend every month. In the Belanjawanku Report, using an elderly couple living in the Klang Valley as an example, it is estimated that they would need approximately RM3,000 a month to enjoy reasonable comfort.

How much you need to spend during your retirement with the funds withdrawn from EPF depends on how you plan to live and invest. Some people may continue working after their retirement age while others invest the EPF money into something they’re passionate about. Many others spend their days with their EPF withdrawals in a laid-back lifestyle.

Don’t Forget About Inflation

Yes, you may have some money withdrawn from your EPF today but don’t forget about the everlasting rule of the world economy - inflation in action.

It all depends on the kind of lifestyle you want to live when you retire. As mentioned above, some people may wish to stop working when they retire and slowly spend their retirement funds with a bare-bones budget. Others may wish to travel and, maybe, continue working, albeit, in a more controlled manner. Some, however, may continue to hustle.

While doing all of this and holding onto your EPF withdrawal funds, remember that there will be an increase in the prices of goods and services over time. So, even if you have some savings now, you’ll need to take into account the inflation you will face in the future.

Therefore, your accumulated savings in your EPF account will likely NOT be enough to tide you through your retirement. This is even truer for those who have some remaining financial debts to settle.

It was reported that ⅔ Malaysians have less than RM50,000 in their EPF accounts by the time they are eligible to withdraw their funds. To ensure that retirees don’t live below the poverty line when they stop working, more needs to be done.

EPF Withdrawal and its Restrictions

As a retirement plan, of course, there will be restrictions in place to justify the withdrawal of funds. The money saved up in your EPF account is meant to carry you through your retirement, more specifically, when the EPF member reaches the age of 50 years old.

Even then, at 50, you’re only allowed to withdraw up to 30% of what’s in your EPF account. The balance can be withdrawn when you reach 55 years old.

The funds are placed into two accounts with two varying withdrawal flexibilities. Members are not allowed to withdraw from their Account I until they reach the age of retirement. You are, however, permitted to withdraw from your Account II for:

  • Build or buy a home

  • Reduce or redeem a housing loan

  • Children's education

  • Fulfilling a housing loan monthly installment

  • Increasing your loan eligibility under Flexible Housing

  • the Purchase of a PRMA House

  • Hajj

  • Medical expenses

If you have accumulated more than RM1 million in your savings, you may apply to manage your funds on your own. You can find out more about EPF withdrawals here.

Using Your EPF Retirement Withdrawal Funds for Investments

If you do not need the spare cash after your retirement, you may consider using the money for investments. The most important thing for older investors is the ability to recover and have a healthy financial buffer.

If, for example, an emergency happens, you won’t need to withdraw your investments urgently and have the ability to ride it. Of course, if you have debts to pay off, prioritise the ones with high-interest rates because they can drain your savings faster than you can imagine.

While younger investors have ample time to recover from a recession, the same cannot be said for older investors. Considering each scenario, consider investing in lower risk portfolios.

From there on, you can use whatever balance from your EPF withdrawal to target your investment range per month.

Things To Remember About Retirement

  • Start saving early. The earlier you start, the better. That is the main purpose of KWSP in the first place.

  • Relying solely on your EPF money for your whole retirement, especially if you intend to stop working, may not be enough. You will need more depending on the lifestyle of your choice.

  • Settle your remaining debts as soon as possible. Don't overspend your EPF and personal savings too soon. Decide to spend only on necessary expenses and take calculated risks.

  • Remember to take into account you may need long-term care at home

  • If your children are not supporting you financially, you will need to continue paying for food and living expenses, housing, utilities, and other basic needs.

  • There will be a hike in both medical and insurance costs. Consult with your agents.


Most young people don’t think about their retirement age, sometimes thinking that there will always be either a job or enough savings to go around by the time they reach the age. It's a long way away.

The result? People who are unprepared for changes to their plans.

If you are young and have just started working, you are advised to start putting some money away for savings every month. This is outside of what is required by the government under KWSP.

For those who do not have much to spend monthly, you can match your employer’s contribution to your EPF accounts and take full advantage of the retirement savings plans. As long as you examine your budget once in a while and work towards establishing reasonable cash flow, you should be able to retire according to plan.

For those looking for a business term loan, log in and quickly apply for it online with INFT.

Recent Posts

See All


bottom of page