What is Hardship Withdrawal?


I have seen this message (in image) going around the internet and it is making me mad. Our country is facing the crisis of the century, and you are politicizing hardship withdrawals? Seriously?

On Monday, the PM announced that EPF members can apply to withdraw RM500 a month to boost the cash flow in Malaysia during the COVID-19 pandemic via the i-Lestari Account 2 Withdrawal Scheme beginning April 1st 2020.

To ensure the rakyat’s pension funds are secure and untouched, the withdrawals will only be drawn from Account 2, the secondary account where 30% of your EPF contributions are placed. Account 1 where 70% of your contributions rest remains untouched.

Many governments across the world are trying to encourage spending in these bad times, as a reluctance to spend money caused by being locked up at home may lead to a recession.

Note that in the example given in the screenshot, while very admirable, none of the examples given are related to trying to solve the cashflow problem. Ministers deducting or donating their salaries are good measures to help fund their government’s purchase of necessities such as ventilators and face masks.

As for Indonesia’s 6-month tax exemption, this only applies to the manufacturing industry, which in Indonesia is almost entirely reliant on Chinese raw materials that are currently not coming in. Whereas in Malaysia, the government has extended the deadline to submit 2019 tax returns by two months, and has exempted import duty and sales tax on face masks for all Malaysian buyers. To me, that is a sacrifice on the nation’s coffers, but one that will greatly benefit us.

Of course, the Malaysian government is also literally giving out cash in the form of Bantuan Sara Hidup payments amounting to RM760mil but since that was already in the works, and only the payout date was advanced from May to March to help ease the rakyat, we would not count that as part of the government’s drastic COVID-19 measures.

While you are able to make your i-Lestari withdrawals with no strings attached, in the US the Senate is battling over measures that if passed, permits you to take out hardship withdrawals of up to $100,000 from your retirement plan BUT you will still incur income taxes on the amount you withdraw, and once withdrawn you have only three years to pay those taxes and replace all the money you withdrew from your own retirement plan or face a fine!

So to those who are not fans of the current government, I understand your anguish, but please do look up what a hardship withdrawal is before making a silly viral post. The last thing Malaysia needs right now is to become more divided on political lines.

Berat sama dipikul ringan sama dijinjing. We can get through this, Malaysia!

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