Economist points to inflation, individual spending patterns, financial priorities as contributing factors
PETALING JAYA: Mounting cost-of-living pressures are forcing lower-income Malaysians to rely on their Employees Provident Fund (EPF) Flexible Account 3 savings for daily survival as wages fail to keep pace with rising expenses.
Putra Business School economist Assoc Prof Dr Ida Md Yasin said the high frequency of withdrawals among lower-income contributors reflects structural income constraints and individual financial behaviour.
“Insufficient income relative to rising expenses is a key driver, but spending discipline also plays a role.
“At the end of the day, individuals must try to ensure their income is equal to or exceeds their expenses. If not, they may rely on withdrawals or debt.”
She said EPF Account 3 effectively functions as a social safety net, given that its design allows contributors to access part of their savings when needed.
“The moment withdrawals are permitted, it means contributors are allowed to spend part of their savings.
“However, the remaining balance is still meant for retirement,” she said, adding that the facility has largely achieved its intended purpose.
She also pointed to inflationary pressures as a key driver, saying the rise in living costs appears to be outpacing income growth, particularly among lower-income groups.
“This creates a situation in which people turn to their savings for immediate needs. But it is not solely about inflation as individual spending patterns and financial priorities also matter.”
Ida added that withdrawals could, in some cases, serve as a short-term coping strategy, provided individuals are able to rebuild their savings through higher income and disciplined financial management.
“However, repeated withdrawals will gradually reduce retirement savings. Retirement planning requires a long-term perspective,” she noted.
For Harith Kamal, who earns below RM3,000 a month, EPF withdrawals have become necessary to cope with rising daily expenses.
“It is mainly for daily expenses. My salary is not enough to cover basic needs, such as food, fuel and tolls.
“With the current economic situation, things have become even more difficult,” he said, adding that he has made withdrawals for two consecutive months just to get by.
He said even after cutting back on non-essential spending, he still struggles to make ends meet.
“I try to avoid eating out, but even groceries are expensive now. Bills are also high and transport costs, especially fuel, make it even tougher. I am barely making ends meet.”
Having already depleted his personal savings, Harith said withdrawals from EPF have become unavoidable to cover essential and work-related expenses.
“Of course I am worried about my retirement savings. But right now, I need to survive. I do not really have a choice.
“Earning below RM3,000 while handling significant responsibilities feels unsustainable. Higher pay would at least give me room to plan ahead and set aside emergency funds.”
Meanwhile, Nur Nafisah Hamdan, who earns above RM3,000, said she turned to EPF withdrawals as a strategic step to manage financial obligations.
She said the decision was driven by a need to settle debt carrying monthly interest rates higher than EPF dividends.
“It made more sense to use the funds to clear the debt rather than let it accumulate,” she said, adding that the withdrawal was also influenced by a period of temporary unemployment.
While she said her current income is sufficient for now, she expressed concern about future affordability, particularly with family planning and broader economic uncertainty.
“The money is meant for retirement. This was just a temporary solution. This experience was a wake-up call. It reflects poor financial planning and I would avoid doing it again unless absolutely necessary.”
Earlier, data from EPF showed that contributors earning below RM3,000 made up 51.1% of withdrawals from the Flexible Account, but accounted for only 28.6% of total withdrawal value.
In contrast, those earning RM10,000 and above comprised just 4% of withdrawals, yet contributed 17.7% of total withdrawals, indicating more strategic use of the facility among higher-income contributors.
The Flexible Account was introduced in May 2024 as part of a broader restructuring of members’ savings.
