What can you do with the 4% contribution deduction from EPF?

If you’re a person that is employed by a company under a contract of service, you’re required to contribute a certain percentage of your gross salary to the Employees Provident Fund (EPF). EPF is a government’s retire scheme in order to help Malaysian to have an easier retirement life. 

Recently, in order to boost Malaysia’s economy the government announced an Economic Stimulus Package 2020 which stated that employee’s EPF contribution percentage will be reduced from 11% to 7% starting 1st April 2020 until end of the year. 

With the 4% reduced, it means your take home salary will have another 4% extra. How much exactly is 4% and what can you do with the 4%? 

Here’s an image to break down to you how much is that 4% means.

If your gross salary is at RM 4,000 then you would have an extra RM 160 a month. From April until December there’s 9 months, which means you’d have RM 160 * 9 = RM 1,440 extra.

What can you do with that extra money?
I’ve collected a few responses from my Instagram after asking there and added some of my personal views on it. Thank you to people that replied to my question! 🙂

1. Contribute to Travel Funds
Travel lover rejoice! An extra RM 1,440 to travel sounds great. To make it even better, the Economy Stimulus Package 2020 will be giving RM 100 digital voucher per person for domestic flights, hotels and trains. There will also be income tax relief of up to RM 1,000 on expenditure related to domestic tourism. However due to the Covid-19 virus still on going, it is important to be more careful while traveling. 

2. Investments
One of the feedback I got was investing in stocks. With the current downtrend of stock market around the world, having some extra cash for bargain hunting comes just in time. Stocks have higher risks of course, going for lower risks investment like funds and bonds are good choices and opt for a RM 100 auto debit monthly to your fund is a really good practice.

3. Save up as emergency fund
Add up to your emergency fund as you don’t know when you’ll need that extra money in the future. 

4. Spend and shop
Yay! More money means more things to splurge on. Spending money will actually help stimulate the country’s economy so don’t feel guilty about it 😉 get the phone or camera that you’ve been eyeing for!

5. Donation 
If you’re feeling generous, donate your money to those in need. There’s many form of donations such as, buying daily essentials, sponsoring a child or pet. If you’re not able to donate much, you can always go for volunteer work! Giving back to the society when you can. 

6. EPF Contribution
You can actually request to stick back to the 11% contribution rate instead. With EPF’s average 6% annual interest rate, it actually isn’t too bad to remain contributing. Of course there’s better investment that offer a higher return than EPF and if you’re willing to research and manage those investments you can easily earn more than 6%. 

I am actually planning to stick with the 11% contribution rate or plan to invest in a bond or fund instead.
With only 7% of EPF contribution rate instead of 11%, what would you choose to do with the extra 4% money for the rest of the year?

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