Retire Gracefully

 

"If we do a little financial planning we can avoid spending all retirement fund too fast."

Based on the Employees Provident Fund’s (EPF) statistics, while the average life expectancy of the Malaysian population is 75 years, 50% of its retired members spend their entire EPF savings within 5 years after withdrawal. If we do a little financial planning we can avoid to be a part of the above statistics.

Here are two broad categories of what we can do:

1. To protect our EPF savings and spend the savings wisely to generate income during retirement,
2. To nurture multiple “financial nest eggs” and not just rely on EPF savings as our sole source of retirement fund.

 Protecting EPF Savings

1. Buy Property

When we withdraw EPF savings between the age of 50 to 65 years, one of the most sensible ways to protect its value is to buy a piece of rental property. This property can be a condominium at a prime location (with proven demand for rental property), a low-cost apartment bought through an auction, a single-storey shop at a busy but cheaper part of town, a piece of plantation land shared with family members, etc.

Such property should generate passive income for our retirement, both its income and asset values are protected against inflation and, unlike unit trust funds, depletion.

2. Leverage with property loan

If you pay the entire purchased property with your EPF savings and yet you wish to use part of your EPF savings for such purposes like starting a small business, buy gifts for family members, medical expenses, etc., you can obtain the cash upfront by arranging a property loan and let the rental income pay off the loan by instalments.

At the age of 50, when you withdraw your entire savings in Account 2 to buy a property, you are still eligible for a 15-year housing loan or two-generation loan. As long as the rental income is sufficient to pay for the monthly loan installment, you can use part of the EPF savings upfront. The loan will eventually be paid off by the rental income that you receive. You will still hold the ownership of the property. At the end of the loan tenure, you continue to receive rental income.

It is also possible to buy a property with a price beyond your EPF savings. At the age of 50, withdraw your entire Account 2 to pay as down payment of a property and get a 15-year housing loan or two-generation loan. Pay the property loan installment with rental income and/or your salary income before your retirement.  At the age of 55, withdraw all your remaining EPF savings and pay down the loan. With careful planning, you may need to work just a few more years to have a piece of rental property free of mortgage payments.

These are just a few examples. There are many possible arrangements with rental properties, EPF savings, monthly salaries and property loans. It depends on your scenario. Plan it wisely.

* You don’t have to wait until 50 years old to withdraw your EPF’s Account 2 for your first or second residential properties (Please check the specific conditions stipulated by EPF).

3. Buy Shares

Besides properties, shares are also good instruments to hedge against inflation. This option has higher risks for people who are not so financially savvy. The key is to buy blue chip stocks that generate positive cash flow, growing profits and consistently declare good dividends. And buy these stocks at fair prices.

It is easy to find such good stocks simply by following good fund managers who are famous for value investing. Just read the annual reports of their funds. One of such funds is listed in Bursa Malaysia’s main board, i.e. icapital.biz Berhad. Read its annual report to find out the stocks that the fund invested in.

The next step is to buy these good stocks at fair prices. Learn the ratios like P/E (price earning) and dividend yield. Learn about the business cycle and that when interest rate goes up, general market share prices come down and vice versa. It is about a simple idea of buying at low prices and receiving dividends for the long-term. You may not catch the bottom, but as long as you are not buying at a ridiculously high price, with holding power you can hardly lose money on these blue chip stocks.

If you think that trying to time the stock market is a bit too stressful and “risky” then just buy these selected good stocks progressively and periodically over a period of one to three years using your EPF savings.

4. Monthly withdrawal

Some may suggest that in order to prolong the period of depleting our EPF savings, we should opt for monthly payment withdrawal instead of a lump sum withdrawal. I just think it will be more rewarding to take out the entire EPF savings if you learn to invest carefully and wisely into rental property or shares. Due to high inflation rates, the return of investing in properties and shares is always higher than the dividends paid out by EPF.

Ultimately the above suggestions cannot work properly if there is no other source of retirement funds besides EPF. We need to build multiple “financial nest eggs” before we hit retirement age.

To build more financial nest eggs other than EPF

1. Private Retirement Scheme (“PRS”)

In 2012, a new type of fund was approved by the Malaysian government as an alternative solution for employees or self-employed persons to save for their retirement. It is called a Private Retirement Scheme. There is no fixed interval or fixed amount to invest in such schemes. It is entirely up to the investor on a voluntarily basis. While you can withdraw 30% of your invested fund once a year, you can only withdraw the remaining 70% upon reaching retirement age.

I am not a fan of investing in managed funds but this PRS fund has a unique feature. For the first ten years from assessment year 2012, your annual contribution into PRS fund, up to RM3,000, is tax deductible. This is in addition to the RM6,000 tax deduction permitted for EPF contribution and life insurance premium and the RM3,000 tax deduction permitted for education or medical insurance premiums.

If you invest RM3,000 in PRS funds annually for the next 9 years and your tax bracket has hit 26%, your return from such tax incentive alone would be 4%-5% in average annually for the next 9 years on top of the return from the fund performance. Of course, the return from fund performance depends on the fund manager of the fund you choose. There are many insurance and unit trust companies offering PRS funds.

Build a few “financial nest eggs” that generate income in retirement years

2. Property, again

I cannot help but notice the characteristics of the people around me who had reached their retirement age without financial worries. They may or may not be “financially literate” in our definition, but they made good buying decisions when they were young.

Almost all of them bought some form of properties like shops, apartments, small pieces of land, big houses, etc. They were not rich people or high income earners when they were young. Among them were fishmongers, tailors, grocery shop owners, teachers, office workers, accounts executives, etc. They saved money diligently and at one point or other in their lives, they bought a piece or a few pieces of important properties, alone or shared with someone they trust, that in later years bring in passive income or a lump sum fund for their retirement. There was no fancy financial instrument.

3. Shares, again

Some of them do hold shares.

The logical way is to invest in shares with consistent earnings growth and consistent dividend payout. There are quite a number of such stocks in Bursa Malaysia. You just need to buy them at fair prices and keep them for long term.

From friends and relatives, I also noticed that some who made money in stock markets follow a few good blue chip shares closely. They do not trade these stocks actively. They bought these stocks in the year when the market was bad and sold these stocks in the year when the market was good.

4. Skills and lifestyles

If you love your work and if your experience or knowledge are in demand, you can choose to continue to work after reaching your retirement age. I know ex-teachers who are giving tuitions. I know one ex-manager who turned into a high earning consultant helping companies to set-up production plants as he has specific knowledge of the industry. Are you accumulating the right experience so that you can continue to do what you love and earn income in the supposedly retirement age?

There are many non-financial ways to deal with financial issues like savings depletion.

For instance:

Keep a healthy lifestyle when young to avoid diseases or sicknesses caused by alcohol, cigarettes and excessive “good” food. Diet and exercise may help you save some medical bills avoiding alcoholic liver disease, diabetes, high blood pressure, etc. It is not a 100% guaranteed preventive measure but it is definitely worth a try.

Observe how your grandparents support their retirement years, i.e. by having children, giving them education and instilling good values. Make sure you treat your parents properly to set a good example for your children to learn filial piety.

For most of us, EPF savings alone is not enough for retirement. EPF savings should not be our only source of retirement funds.

While there are many good ideas from the internet, books, TV programs, online and real life courses, etc, the success of retirement planning depends on fine execution of good ideas. We just need to continue to explore and learn. Try to attend property seminars or financial courses to learn the proper execution details to avoid serious mistakes. One of the best ways to learn how to deal with financial issues of retirement is to talk to those who are living happily in their retirement years.

This article is contributed by Financial Planning Malaysia dot com, a pioneer Malaysian financial education blog with quirky but logical ideas. Since 2005.

Clement Jouling ialah Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant). Sekiranya anda berminat untuk mengetahui lebih lanjut tentang pelaburan unit amanah, boleh hubungi beliau terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya.

For many, EPF nest egg may not last the distance

One consultant said RM100,000 in EPF savings was insufficient to fund a leisurely retirement. — Reuters pic

KUALA LUMPUR, Jan 12 — Retirement must be the sweetest moment for any employee who has worked for over 20 years as it will allow them to rest and do leisure activities with their loved ones.

However, inadequate retirement funds may bring these dreams crashing down as some may continue to work following failure to manage their Employees Provident Fund (EPF), the only retirement scheme in the country.

According to studies conducted by the EPF, 70 per cent of inactive contributors had retirement savings of below RM50,000 and will spend it within the first five years of retirement.

Without financial stability from personal saving, pension or children to support them, this situation could put many retirees in a troubling position.

According to EPF’s senior public relations manager Nik Effendi Jaafar, the EPF hoped to increase their members’ saving with the introduction of the minimum wage.

“The main contributing factor for this situation is that low income earners will contribute a small amount into their EPF until their retirement age.

“We hope the minimum wage implemented this year will increase member contributions,” he told Bernama here today.

However, he said the EPF would like to remind its members that their responsibility was to provide basic financial security for retirement but there was a possibility that the funds would not be sufficient for their needs.

Therefore, he said members were encouraged not to depend entirely on their EPF savings by choosing other investment options to increase their savings.

“In addition to that, to avoid reducing their EPF savings, members should only make pre-retirement withdrawals only when necessary. More importantly, we emphasise that a comfortable retirement is possible through sound financial planning,” he said.

Malaysian Government Pensioners Association (PPKM) president Datuk Wan Mahmood Pawan Teh said a panel to provide financial management courses to future retirees should be set up to help them save more and manage their money well after retiring.

“For example, there are suggestions for contributors to invest in asset management companies, but the government has not provided detailed information to them so that they are not exposed to risks or fraud.

“Not all contributors, including from the private sector, can manage funds well. So we want contributors to understand the way to save, invest, set up business and spend in time for their retirement,” he said.

Independent financial consultant Fiona Tahir said, at the age of 55, even if a person receives more than RM100,000 in EPF funds, they still cannot live comfortably.

The best way is to have other forms of saving and to invest at least 10 per cent of the net monthly salary.

“Saving up through normal saving with low return is useless. Savings must be invested in an instrument that yields higher returns than the inflation rate,” she said.

Therefore she advised EPF contributors to invest in unit trust as it was capable of increasing retirement saving with low risk.

“However, we must remember that unit trust is a long-term investment for financial planning during retirement, children’s education, or for emergency matters especially health-related,” she said.

She said each investment, including property, gold and more also had risks and each individual needs to have savings or investment other than EPF to face retirement.

She added that the public should not get involved in suspicious investment schemes which promise high returns in a short period of time. — Bernama

Clement Jouling ialah Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant). Sekiranya anda berminat untuk mengetahui lebih lanjut tentang instrumen pelaburan dan pelaburan unit amanah, boleh hubungi beliau terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya.

Dana negeri mencari kawasan lebih selamat apabila pasaran tempatan merundum

Oleh Shannon Teoh

June 24, 2012

KUALA LUMPUR, 24 Jun - Dana pelaburan negara Malaysia mengalir berbilion-bilion ringgit ke luar negara mencari kawasan selamat apabila ekonomi tempatan kelihatan terus mengalami kejatuhan harga sepanjang tahun dengan beberapa indeks berterusan  dijangka mengalami kemerosotan dalam bulan-bulan berikutnya.

Indeks utama Malaysia, yang menunjukkan aktiviti ekonomi akan datang, mengalami penurunan pada bulan kedua berturut-turut pada April, memberi isyarat bahawa  berturut-turut melambatkan perkembangan bersedia untuk diteruskan, kata para penganalisis.

Ahli-ahli ekonomi berkata kepada The Malaysian Insider yang dana seperti Kumpulan Wang Simpanan Pekerja (KWSP) dan Permodalan Nasional Berhad (PNB) akan dilihat mempelbagaikan portfolio mereka apabila peluang-peluang tempatan semakin mengecil.

"Peluang-peluang domestik dibataskan dan diberi pulangan tinggi berpotensi atas jangka masa panjang dalam ekonomi-ekonomi sedih pasaran maju, dana ini mungkin juga boleh juga mengelakkan gelembung aset tempatan,"kata Yeah Kim Leng, ketua pakar ekonomi penyelidik kredit RAM Holdings.

Malaysian Insider difahamkan bahawa KWSP,  telah membeli dana pelaburan kerajaan bernilai RM8 bilion di hartanah London sepanjang 18 bulan yang lalu, telah mengembangkan portfolio asing sebanyak 50 peratus sejak 2010.

Satu sumber dari dana pencen terbesar negara berkata portfolio luar negerinya sekarang berada pada satu rekod 14 peratus dengan RM500 bilion di pelupusannya dengan laporan sebelum ini mengatakan pertumbuhan portfolio ini untuk 20 peratus pada 2014, memberinya RM30 bilion untuk dibelanjakan.

"Kami mencari tempat perlindungan selamat kerana kami tidak mahu meletakkan semua risiko dalam satu tempaty," kata sumber, dan RM5 bilion telah disimpan untuk hartanah dalam modal kewangan global, di mana separuhnya telah terikat.

Beliau juga menyatakan bahawa dengan kadar faedah rendah secara global, "tidak ada guna menjalankan pendapatan tetap," menambah bahawa terdapat satu kemungkinan besar KWSP akhirnya akan memperuntukkan lebih banyak dana bagi modal di UK.

"Sekarang terdapat pilihan sangat sedikit di sini. Malah yang dipanggil kaunter-kaunter cip biru ialah "bukan betul-betul biru" dan terdapat banyak ketakpastian dengan pilihan raya akan datang," tambah sumber.

Bank of America Merill Lynch baru muncul ekonomi Asia Chua Hak Bin juga berkata melihat keadaan luar negeri positif untuk kedua-dua ekonomi tempatan dan pelaburan dana negara.

"KWSP, misalnya, mungkin memiliki lebih kurang 20 peratus pasaran stok ekuiti dan telah tidak dapat memuatkan pemain-pemain lain, didorong kenaikan penilaian-penilaian dan dikurangkan kecairan pasaran.

Chua menekankan London kerana ia adalah satu pilihan utama untuk kepelbagaian kerana "hak harta benda jelas dan UK jelas terbuka kepada pelaburan asing."

KWSP yang  dikaitkan dengan loji kuasa Battersea di kawasan selatan di daerah kewangan London, yang sejak itu direbut oleh gergasi-gergasi pembangunan hartanah Malaysia seperti SP Setia dan Sime Darby untuk kira-kira RM2 bilion.

Tetapi dana  telah membuktikan sekurang-kurangnya RM10 bilion untuk membeli harta di London baru-baru ini, dengan jemaah-jemaah membiayai Tabung Haji yang terkini, mengumumkan pada April yang RM1 bilion telah disimpan di pelaburan di luar Malaysia.

PNB menyempurnakan satu perjanjian pada Mac apabila membeli mercu tanda London, One Exchange Square di bandar raya itu di daerah kewangan untuk £500 juta (RM2.5 bilion), membawa pesta pembelian pengurus aset milik negeri di ibu negara British itu tahun lepas untuk lebih daripada RM4 bilion.

Ia juga dilaporkan akan mencari sebagai pinjaman £628 juta dalam tempoh lima tahun bagi membantu membiayai membeli-belahnya di tiga mercu tanda ciri-ciri London, kata penerbitan Thomson Reuters, Basis Point, bulan lalu.

Walaupun merancang untuk membeli 350,000 kaki persegi bangunan Woolgate Exchange di bandar raya itu daerah kewangan untuk RM1.27 bilion tidak menjadi pada saat akhir pada April.

KWSP juga meminjam £300 juta pada Disember dalam pinjaman luar pesisir pertamanya bagi membiayai pemerolehan tiga harta berasaskan di  London.

Ia juga dilaporkan Ogos lepas dalam perbincangan membeli pusat pengedaran Sainsbury, rangkaian pasar raya British di luar pusat London untuk RM400 juta, dan dua lagi di London untuk sejumlah RM1.5 bilion. 

Dana pencen terlebih dahulu membeli bangunan pejabat di London November lepas untuk RM780 juta sebagai sebahagian daripada rancangan-rancangan melabur sejumlah RM5 bilion dalam pasaran hartanah British.

Momentum bertambah ke arah pasaran British kerana Malaysia merekodkan satu pertumbuhan ekonomi hanya 4.7 peratus untuk tiga bulan pertama 2012, satu pertiga berturut-turut untuk suku tahunan kemelesetan.

Indeks utama Malaysia, yang diramalkan ke arah ekonomi, melihatkan satu kemerosotan 0.5 peratus pada April, kadar susut sama pada Mac dan perbandingan tajam dengan satu peningkatan 1.7 setiap sen pada Februari.

Sumber: The Malaysian Insider

p/s:-

Ambil peluang ini dikala harga saham yang semakin merundum untuk membeli unit - unit baru  yang lebih murah terutama buat rakan - rakan yang belum melaburkan sebahagian simpanan KWSP ke Unit Amanah.

       

Clement Jouling ialah Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant). Sekiranya anda berminat untuk mengetahui lebih lanjut tentang instrumen pelaburan dan pelaburan unit amanah, boleh hubungi beliau terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya.

Betul ke pelaburan unit amanah berisiko tinggi?

Seperti yang saya war-warkan sebelum ini, saya adalah Part Time Unit Trust Consultant dan sentiasa berjumpa prospek especially yang mempunyai simpanan KWSP tetapi tidak transfer sebahagian daripada simpanan KWSP mereka ke Dana Unit Trust.

Secara ikhlasnya, saya bagitahu golongan ini, mereka memang tidak berapa bijak merebut peluang sebab tidak menggunakan peluang yang diberikan KWSP untuk menggandakan simpanan KWSP mereka melalui Pelaburan Unit Amanah. Inia dalah  kerana KWSP tidak akan mampu memberikan dividend melebihi 10% setahun dek kerana kekangan peraturan pelaburan yang ditetapkan oleh mereka.

Anda nak tahu apa alasan yang diberikan oleh golongan sebegini?

Mereka kata melabur dalam Unit Amanah adalah BERISIKO TINGGI.

Para pembaca blog sekalian, sebenarnya pelaburan dalam dana unit amanah memberi peluang kepada pemegang unit untuk mengurangkan risiko pelaburan dengan melakukan proses penyebaran risiko dengan melabur dalam pelbagai instrumen pelaburan seperti saham dan sekuriti yang luas dalam syarikat, sektor atau lokasi yang berlainan.

Kepelbagaian portfolio mengurangkan risiko pelaburan berbanding pelaburan secara langsung dalam pasaran ekuiti mahupun sekuriti. Sekiranya berlaku kejatuhan aset pelaburan tertentu, kenaikan harga dan nilai aset lain dalam portfolio pelaburan dapat menampung kerugian tersebut.

Lagipun, objektif pelaburan Unit Amanah adalah untuk jangka masa lebih dari 3 tahun dan bukannya untuk jangka masa pendek.

Hakikat yang perlu kita terima adalah, walaupun menyimpan dalam KWSP pun ada RISIKO juga iaitu risiko Inflasi. Tahun lepas, inflasi adalah 4%, dan dividend KWSP adalah 6%, jadi pencarum hanya memperolehi keuntungan sebenar 2% sahaja!

Tahukah anda bahawa kebanyakan Dana Shariah Unit Amanah yang diluluskan oleh EPF rata-rata memberi pulangan antara 10%-15% setahun?

Sekiranya kita tak ambil tindakan dari awal, memang boleh mengggigit jari…mana taknya, RM10,000.00 dengan 12% dividend boleh jadi RM96,463.00 selepas 20 tahun.. tapi dengan dividend EPF, RM10,000.00 hanya menjadi RM32,071.00 dalam tempoh yang sama.

Saya pasti anda adalah seorang yang bijak dan ingin mengambil tindakan PANTAS dan tidak mahu menangguhkan peluang KEEMASAN ini…FAST ACTION…FAST RESULT…  

Ok, jumpa lagi dalam posting seterusnya atau anda boleh emailkan saya di clementjouling@yahoo.com untuk kita berjumpa bagi saya menerangkan lebih lanjut tentang cara pemindahan simpanan KWSP ke Dana Unit Amanah.

Salam Hormat.

Clement Jouling ialah Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant). Sekiranya anda berminat untuk mengetahui lebih lanjut tentang instrumen pelaburan dan pelaburan unit amanah, boleh hubungi beliau terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya.

Are EPF savings alone enough?

by eugene mahalingam

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Invest ahead to generate extra money after retirement.

WHEN I was growing up, I aspired to join the Government. The main reason so was that I could be eligible for a pension scheme. This came from the fact that my parents were both civil servants and they got to enjoy the benefits of a pension when they retired. They still do.

While it’s not much, it’s comforting for them that at their age, they would continue to have an income for as long as they lived. I wanted to be able to look forward to that as well.

Alas, fate – or was it free will? – had a hand to play in my career choice and I ended up taking a job in the private sector. Seeing as I’m having fun doing what I do, I don’t see myself switching careers any time soon. So there goes my plan of getting a pension.

Time to switch to Plan B, namely, the Employees Provident Fund (EPF). It is intended to help employees from both private and non-pensionable public sectors save a fraction of their salaries in a contribution scheme. The contributions are invested to generate income and the funds in the contributors’ accounts are to be used in the event that the employee is temporarily or no longer fit to work.

It primarily applies to retirement, but sickness, disabilities or unemployment are also covered. The EPF also provides a framework for employers to meet their obligations to employees.

As a retirement plan, money accumulated in EPF savings can only be withdrawn when members turn 50, during which they may withdraw only 30% of their balance. Members who are 55 or older may withdraw the entire sum.

Recently, the EPF board declared a dividend of 5.65% for the financial year ended Dec 31, 2009, up 115 basis points over the 4.5% paid for 2008.

According to Fundsupermart.com Malaysia, over the past five years, EPF has been distributing an average annual dividend of 5%. The average real dividend rate for the past five years was 1.7%, after reflecting an average inflation rate of 3.4%.

With that, the important question to ask is: Will the savings from our EPF be enough to sustain us in our retirement years?

Expert advice.

In his Personal Investing column, “Enough money for retirement?” last year, MRR Consulting investment adviser and managing partner Ooi Kok Hwa says as the average Malaysian lived to about 75, those who retire at 55 would need to manage their EPF savings for 20 years. But most retirees spend all their EPF money within three years of retirement, he claims.

Ooi provides a breakdown of how a retiree can manage his EPF savings for 20 years.

“We will assume a starting pay of RM1,500, growing at the rate of 8% per annum; an average bonus of two months per annum, average EPF returns of 5%, total EPF contribution of 23% (employer: 12%, employee: 11%) and inflation rate of 3%.

“Our analysis shows that if we are able to live with just one-third (or 33%) of our last drawn salary, the EPF money should be able to support us for 20 years until we pass away at 75.”

According to Ooi, if a person’s last drawn salary is RM13,976 at 55, he can only afford to spend one-third or RM4,612 per month after retirement (1/3 x RM13,976).

He stresses, however, that the computation was based on the assumption that a person would still be able to generate 5% returns after retirement.

“Everyone has different financial situations. If possible, we need to build our own investment portfolio apart from the EPF savings. We may need to seek some part-time jobs after retirement if our financial resources do not permit us to stop working,” he wrote.

“Besides, we need to clear all our outstanding debts before retirement. We also need to buy enough life and medical insurance for ourselves as well as set up education funds for our children.”

Financial planner Wilson Low says a person who’s concerned about his or her future financial well-being has one clear option – invest.

“Anyone who’s worried about not having enough money in their old age should do something about it, to make sure that you do have money to sustain you when you’re old and not working any more,” he adds.

“The obvious thing to do is to invest in something that can help generate an income for you when you’re older. There are various investment avenues out there and with proper planning and research, financial independence is not an impossibility.”

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What some have done.

Rita (not her real name), is a retired nurse. After working for the Government for 30 years, she worked in the private sector for a further nine years because she needed the money.

However, she admits that without her pension, it would be difficult to make ends meet. “There are things like your children’s education or repairs to the house that you need to think about. Without the pension, the EPF definitely would not be enough.”

Rita adds that as a former civil servant, she will always be eligible for free treatment at government hospitals. “This is especially important since most medical expenses will come up as one gets older,” she says.

Rita adds that EPF also used to declare higher dividends, between 6% and 7% in the 1990s.

Kamala (not her real name) was a former employee of the Rubber Research Institute of Malaysia. A Government-based organisation initially, it was privatised in the 1990s and its employees were asked to chose either a pension or EPF scheme as a retirement option.

Kamala chose the EPF scheme, a decision she claims she regrets. “The money finished quickly as I had many financial obligations like my children’s education and housing loan. I also had to undergo an expensive operation, the cost of which would not have been an issue if I were a civil servant.”

She is however thankful that today, her children have all grown up and give her husband and her money on a monthly basis. “We have also invested our money in property. So financially we are all right.”

Meanwhile, Kong, an information technology executive in his early 40s, says he spends about RM4,000 a month on household expenses, his children’s education and an outstanding home and car loan, among other financial obligations.

“I’m spending so much every month that I hardly have enough to save. Fortunately my wife is also contributing. After 55, it’s definitely not going to be easy. I’ll probably have to continue working until my kids can support themselves,” he adds.

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Source : the star


Clement Jouling ialah Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant). Sekiranya anda berminat untuk mengetahui lebih lanjut tentang perancangan kewangan dan pelaburan unit amanah, boleh hubungi beliau di talian 016-509 0073 atau emailkan di clementjouling@yahoo.com untuk temujanji terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya. 

Whether or not to use EPF money to invest in unit trusts

FINANCIAL SECURITY
By LEE KEE CHUAN

THE money in your EPF account is the money that will feed you and your family from the day you retire until you pass on. It will be good if your children give you monthly allowances when you retire, but it may be prudent to plan your own retirement financial security.

Your EPF money, therefore, deserves your serious attention. There are unit trust fund promoters who will approach you to draw it out to invest in their EPF-approved unit trust funds.

The question is: Should you invest for potentially higher returns (by exposing your EPF money to higher risks) or should you just be content with the EPF dividend rate?

Firstly, let’s look at why EPF introduced such a scheme. According to the EPF website, the “EPF Member’s Investment Withdrawal scheme allows you to withdraw part of your savings in Account 1 for investments to increase your retirement fund to support your life after retirement.”

This means that you are given the opportunity to make your EPF money work harder for you.

The second reason is actually the most important. Inflation erodes your purchasing power. Over the last five years, EPF has distributed an average of 5.4% dividend annually while the inflation rate averaged 2.7%.

Thus you should make the best use of the withdrawal scheme allowed by EPF to ensure that you preserve the purchasing power of your EPF money in future.

Thirdly, you should let the power of compounding work for you.
Albert Einstein famously said: “Compound interest is the eighth wonder of the world. He who understands it, earns it.”

Thus you should let some of your EPF money compound at a higher rate of return.
Even a small positive difference in annual return can make a big difference over time. To give you a better idea of the power of compounding, let’s use the Rule of 72.

If your money earns 5% a year, it will double in 14.4 years. If it earns 7% pa, it will double in 10.28 years. For 9% pa return, your money doubles in eight years. If your return is 11% pa, it doubles in 6.55 years. If you earn 13% a year, your money doubles in just 5.54 years. (To calculate the number of years for your money to double, divide 72 by your rate of return.)

But before you start picking up your handphone to call your unit trust agent or if any overzealous unit trust agent shows you this article to convince you that you should invest with him or her, please finish reading the rest of this article.

Let me give you a word of caution first. To invest your EPF money successfully in unit trusts, you must follow the advice below as investing in any unit trust fund carries investment risk, meaning the price of unit may go up as well as down.

To help you decide whether using your EPF money to invest in unit trust is for you, I bring up these two points to help you.

Firstly, by withdrawing your EPF money and investing in unit trust, it will not earn you any EPF dividend. Add in the upfront sales charge by the fund house of 3%. This is the opportunity cost that you need to consider.

Secondly, there is the investment risk of unit trust funds that you must consider. There was a report in www.thestar.com.my way back in Aug 8, 2006 that reads: “The Government, alarmed over the more than half billion ringgit losses reported from investments in unit trusts involving Employees Provident Fund (EPF) contributors, has directed the EPF to impose stricter conditions on such investments.”

The same report also mentioned: “A Malay daily reported over the weekend that EPF contributors who invested an estimated RM600mil in unit trust schemes had suffered losses.”

Having said that, it is still a good idea to invest your EPF money in unit trust schemes to earn potentially higher returns. However, you must ensure the following few points are adhered to when you invest.

You must have an investment method to start with. The dollar cost averaging (DCA) is a good one to start but make sure you stick with it for years.

Those who withdraw a few times and then see if they make money will not benefit from cost averaging.

There was a case of an investor who religiously withdrew his EPF money every three months to invest in unit trusts in the last 11 years, starting in year 2000.

When he reviewed his investment in August this year due to the recent market turmoil, he was glad that his unit trust investment using his EPF yielded 6.95% compounded return.

This case shows that you must stick with a method that invests at regular intervals consistently over a considerable period to be successful in making your EPF money grow and increase your retirement fund.

This is because a regular investing method such as DCA can reduce the investment risk by diversifying the timing risk of investing.

How about investing your EPF money using value averaging (VA) regular investing method? If you have read my article two weeks ago in this column, you will know why VA is the smarter version of DCA.

By using the reconstructed data from the same case I mentioned above, the back testing done using value averaging on an EPF-approved Malaysian small cap fund is really interesting.

The VA method yielded annual compounded return of 13.21% over the similar period.
The result is consistent with the research done by Professor Paul Marshall, who concludes that value averaging does show a performance advantage over dollar-cost averaging, without incurring additional risk.

Value averaging investors sleep soundly at night. You deserve a good night sleep too. Start using VA.

Lee Khee Chuan is a Chartered Financial Consultant, Certified Financial Planner and a Fellow of Life Management Institute, USA. He is a graduate in political science, psychology and economics from National University of Singapore. He can be contacted at 016-888 0138.

source: The Star

Clement Jouling ialah Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant). Sekiranya anda berminat untuk mengetahui lebih lanjut tentang perancangan kewangan dan pelaburan unit amanah, boleh hubungi beliau di talian 016-509 0073 atau emailkan di clementjouling@yahoo.com untuk temujanji terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya. 

KWSP tidak beri pinjaman kepada syarikat berisiko

November 29, 2011

Kerajaan melalui Kumpulan Wang Simpanan Pekerja (KWSP) tidak akan memberi pinjaman kepada syarikat berisiko tinggi sebaliknya hanya kepada syarikat yang mempunyai kaitan dengan kerajaan dan mempunyai aset, persidangan Dewan Rakyat diberitahu hari ini.

Timbalan Menteri Kewangan, Datuk Awang Adek Hussin, berkata semua bentuk pelaburan KWSP akan dipantau dan dinilai panel pelaburan dan risiko KWSP sebagai jaminan bahawa pinjaman itu selamat.

“Keputusan panel ini perlu mendapat kelulusan Menteri Kewangan yang perlu ditapis di peringkat Kementerian Kewangan. Saya yakin pelaburan berisiko tinggi tidak akan dibuat,” katanya ketika menjawab soalan Datuk Ismail Kasim (BN-Arau). Ismail ingin tahu sama ada KWSP benar-benar memantau semua aktiviti terutama yang berisiko tinggi.

Awang Adek berkata panel pelaburan KWSP itu dianggotai beberapa pakar termasuk Timbalan Gabenor Bank Negara dan Timbalan Ketua Setiausaha Perbendaharaan.

Menjawab soalan Azan Ismail (PKR-Indera Mahkota) mengenai kedudukan jumlah pinjaman KWSP kepada institusi korporat, Awang Adek berkata setakat Jun 2011 jumlah pinjaman KWSP kepada institusi berkenaan adalah RM83.7 bilion.

Beliau berkata, bagi pelaburan dalam bentuk pinjaman, sebahagian besarnya adalah berjaminan kerajaan dengan RM79.41 bilion atau 95 peratus merupakan pinjaman kepada kerajaan manakala baki RM4.31 bilion adalah pinjaman institusi korporat.

Awang Adek berkata, KWSP sentiasa memastikan pelaburan yang dibuat akan mendapat pulangan tinggi dan tidak bergantung kepada jaminan kerajaan semata-mata.

- Bernama