Do you want to secure bigger EPF savings for a more comfortable retirement?
Read on my 6 simple but effective ways how you can have bigger EPF savings.
Table of Contents
- 6 simple but effective ways to secure bigger EPF savings
- My final thought on securing a bigger EPF savings
6 simple but effective ways to secure bigger EPF savings
Without further ado, let’s go through my 6 simple but effective ways to secure bigger EPF savings:
1. Plan and ask for a pay rise
We all know that on average, employees in Malaysia save about 23% of their monthly salary through EPF. Which, about 11% is contributed by the employee while the employer contributes about 12% or 13% to the employee’s EPF account.
From the above, it is very clear that the employee’s salary directly affects the monthly EPF contribution amount.
If you can negotiate for a 5% increment, you are also helping yourself to put more money into your EPF savings.
Because of this, an employee should plan and ask for a pay rise.
Be proactive rather than just plainly wait for your employer to give you the pay rise.
But, of course, the employee must have a proper plan and valid reasons with the proof before he approaches his superior for a pay rise.
This is to avoid creating a hard time for himself if his employer rejects his pay rise request.
2. Seek new opportunities with better pay (and package)
If you feel like you deserved the pay rise but you didn’t get it, it is time for you to look for new opportunities.
Most probably, these new opportunities come with better pay and hopefully a better package too.
Just remember that your monthly EPF contribution is directly affected by your salary.
The higher your salary, the more you have in your EPF savings.
3. Invest smartly in a high-return unit trust fund
EPF members are allowed to invest a portion of their account 1 in selected unit trust funds.
This is another way for you to secure bigger EPF savings, provided you invest in the right unit trust fund. Therefore you need to do some homework before investing your EPF savings in the selected unit trust funds.
Because you need to take into consideration on sales charge of investing in the unit trust, which is about 2.5%, and annual management fees of about 1.5%.
Then, compare that with the average past 10-year EPF dividend rates of about 6%. To make sure you make the right decision, the return on investment from the selected unit trust fund should at least give you 6% returns after deducting the fees.
Thus, if you want to secure bigger EPF savings through unit trust investment, you need to do it smartly.
4. Opt for a higher EPF contribution
Do you know that EPF members can opt to contribute more to EPF than the statutory rate?
So, Yes. EPF allows its member to contribute more than the statutory rate. But they need to submit the specific form as below:
- Form KWSP 17A (AHL)
- if the employee chooses to contribute more than the statutory rate
- Form KWSP 17A (MAJ)
- if the employer chooses to contribute more than the statutory rate
- Form KWSP 17A (AHL) and KWSP 17A (MAJ)
- if both employees and employers choose to contribute more than the statutory rate
EPF members who wish to contribute more than the statutory rate to secure bigger EPF savings may consider submitting form KWSP 17A (AHL).
In fact, some companies offer to contribute higher than the statutory rate as a better employment benefit to its employee. The next time you look for new opportunities, you might want to consider being part of these companies.
Else, you can always suggest to your management to offer higher EPF contributions as a way to enhance existing employee benefits.
5. Make your own contribution to EPF
Aside from opting for higher EPF contributions, EPF member can also make their own contribution through voluntary contribution schemes such as EPF Self Contribution (for employees or self-employed) or i-Saraan (for self-employed).
The process is simple, easy, and convenient. It is also voluntary. This means that whenever you have some additional cash, just make an online transfer to your EPF account. Do take note, the maximum amount allowed for voluntary contribution is RM60,000 per year.
Imagine how much you can grow your EPF savings if you consistently pump 10% of your salary through the EPF Self Contribution scheme.
I would say this is the easiest and most effective way to have more money in your EPF savings.
6. Refrain from making a withdrawal from your EPF savings
Lastly, you can definitely secure bigger EPF savings by refraining from making EPF withdrawals before retirement.
After all, your EPF savings are meant to support your retirement years.
Even though EPF allows withdrawal before retirement for the purpose to help to prepare its member before and during retirement such as:
- Reduce or redeem housing loan withdrawal
- Purchase a house withdrawal
- Education withdrawal
- Withdrawal for monthly housing loan
In my opinion, it is best not to withdraw your EPF savings for these purposes.
Thus, it is important to review your financial situation before making a big financial commitment such as buying a house.
My final thought on securing a bigger EPF savings
Overall, there are many ways to secure bigger EPF savings. And you can take immediate action for some of these suggestions, such as:
- opting to contribute more than the statutory rate
- making a voluntary contribution through EPF Self Contribution or i-Saraan
For those who just join the workforce, believe me, you will make a huge difference in your EPF savings by making an additional contribution.
Because you can ride higher and faster with the magical force of compounding interest.
I know most youngsters think that retirement is still far away. Lucky are those smart millennials who know the importance of retirement planning and start saving early for their retirement.
For those in middle age and approaching retirement, let’s fully maximize the time we have to grow our EPF savings.
I always believe it is never too late to take action for a better retirement.
Lastly, discover my other EPF-related post under the EPF category.
Thanks, Michelle for the post. I have a question. Since the max for self-contribution in a year is 60k, is there a difference between putting in the money in one lump sum or spread out evenly every month? For a lump sum, is there a difference between putting it say, middle of the year or end of the year? Is the dividend calculated on a pro-rated month by month basis?
My reasoning is this: if there’s no difference, I would say in a low-risk fund (eg. StashAway Simple) to earn small interest, and then put in a lump sum at the end of the year, rather than spreading it through 12 months. Hope my question makes sense.
Hi Lee,
Thank you for your comment. And you’ve got a good question 🙂
In early this year (2021), one of my family members successfully made a lump sum contribution of RM60,000 to his EPF Self Contribution.
And yes, you may also spread out your contribution evenly.
Yes, there’s a difference between contributing RM60,000 in the middle of the year or the end of the year. Because the EPF dividend calculation is based on “Modified Aggregate Daily Balance”. EPF website on Dividend calculation FAQ mentions that “Contributions for a particular month will be eligible for dividend based on the last day of the contribution month until 31 December”
Do also take a look at the EPF dividend calculation sample. It’s very helpful.
So, the earlier you make the EPF contribution, the more dividend you’ll receive.
As for low-risk cash management StashAway Simple, its projected return is 2.40% p.a., while EPF Simpanan Konvensional, our government guarantees a minimum paid dividend rate of 2.50%. You may refer to the Dividend rates details on the EPF website.
Hope the above helps.
Perhaps share with me your final decision. It feels great to discuss things like this. I believe many others are interested to know about ways to maximize our EPF savings. Thanks again for the great question. Stay safe.
Thanks, Michelle for pointing out how the dividend is calculated. In this case, it’s obviously better to save as much as possible earlier in the year. Of course, this is for the money that need not be touched till age 55.
Hi again Lee,
No problem, my pleasure. Yes, totally agree with you. The sooner you contribute, the more dividend you are eligible for.
Let’s keep growing our EPF savings 🙂
HI Michelle 🙂
Thank you for the informative blog post!
As a fresh graduate who just started working, I intend to self-contribute more into EPF, but im unsure how much is a good amount to contribute.
I was thinking 80% for US stocks which I am really interested in especially individual stocks and the S&P 500, and 20% for EPF self contribution.
What do you think? Could you please advise 🙁
Hi Rachel,
Thank you for your kind words.
Great to know that you are paying attention to retirement planning early in your life. This is a good thing!
For the EPF self contribution, you can contribute any amount at any time. So, you can contribute any amount that you feel comfortable with.
As for investment advice, you may consider engaging a licensed financial planner to help you make better financial decisions.
Do take note of the differences between putting your savings in EPF and other investments, such as EPF withdrawals being restricted/subjected to EPF approval. And also understand the risks involved especially for US stocks so that you can make more informed financial decisions.
Hope the above helps.
Hi Michelle,
Thanks for the post, it is very helpful. I’m earning part times wages for many years and not contributing to epf. Try to catch up on self contribution so use to claim income tax personal relief of RM4000. Since now it is Oct, how do you advise if I go one lump sum or can split over 3 months as long as before 31 Dec 2021.
My concern is will the lump sum looks odd contribution since my epf acc has been hibernating for many years. no employer no contribution.
Hi Hannah,
Thank you for your comment and kind words.
I can understand your situation as I am also self-employed since 2018. Regarding your question, if I were you:
1. I’ll Make a small EPF Self Contribution amount to my EPF account through online banking;
2. Check if the contribution amount appear in my EPF statement through i-Akaun;
3. If yes, I’ll make one lump sum contribution for 2021 as soon as possible.
I prefer one lump-sum contribution because I can benefit from the dividends. As EPF dividends are calculated using “daily aggregate balance,”, the earlier I make the contribution, the more dividend I shall receive. You can refer to EPF Dividends website on how they calculate our EPF dividends.
As for the ‘odd’ part, one of my family members who is also self-employed since 2018 (with no employer contribution since 2018) had successfully transferred one lump sum to his EPF account.
By the way, since you are self-employed, you may want to consider registering for EPF i-Saraan to be eligible for the 15% matching contribution from the Government (maximum RM250 per year). The special incentive will be given from the year 2018 to 2022. If you want, you’ll need to visit the nearest office EPF office and fill in the EPF i-Saraan form. Once your i-Saraan is activated, you can make an online transfer to your EPF account by quoting the i-Saraan contribution.
If you don’t want the trouble to visit the EPF office, fill in the i-Saraan form and not receiving the incentive, you can just go ahead making an online transfer to your EPF account by quoting EPF Self Contribution.
I hope my sharing above helps. Let me know if you have further enquiries.
Hi Michelle, thanks for your advice, it indeed solve my doubt. Yeah, I should try contributing a small amount to see the statement 1st.
And thanks for sharing the EPF dividend calculation and i-saraan scheme, too bad it is not convenient to visit the EPF office so I will probably go with self-contribution.
Thank you …
Hi Hannah,
No problem and glad that it clears your doubt.
Hope that you’ll successfully make the contribution to your EPF savings through the Self Contribution scheme.