Quote: Retirement Is A Journey Not A Destination!!
This is a snippet of a full article from my dropbox area. In there, you can access tonnes of documents. I highly recommend you view them, alternatively you can download the entire folder to your own computer. Internet Explorer is known to have issues, please use Chrome or others. You can view from this link: PRS Info @ Nick's Dropbox
What the heck
is PRS?
"PRS is an investment scheme that facilitates the accumulation of retirement savings through voluntary contributions. The PRS is designed to complement the Employees Provident Fund (EPF) and is regulated by the Securities Commission Malaysia (SC)." taken from Fundsupermart.
"PRS is an investment scheme that facilitates the accumulation of retirement savings through voluntary contributions. The PRS is designed to complement the Employees Provident Fund (EPF) and is regulated by the Securities Commission Malaysia (SC)." taken from Fundsupermart.
Simply said, PRS is another form of investment option for us to save up for retirement.
Why PRS for
Retirement?
Like it or not, when deciding to invest in PRS, we are actually forcing ourselves to save + invest additionally apart from depending entirely on EPF for retirement. The problem with depending entirely on EPF for your retirement is as below:
1. The average annual return of EPF for the past 5 years is only 5.62% (to slow lahhh...) because…
2. Inflation is about 3-4% and might rise higher in years to come. I assume subsidies will be cut. By extreme case cancelling all government subsidies, inflation would double to 6-8%. I will explain how I get this figure next time.
3. The amount accumulated in EPF when reaching
retirement is actually insufficient to
cover the expenses of a person who has retired. Again this is highly dependent
on your desired lifestyle during retirement.Like it or not, when deciding to invest in PRS, we are actually forcing ourselves to save + invest additionally apart from depending entirely on EPF for retirement. The problem with depending entirely on EPF for your retirement is as below:
1. The average annual return of EPF for the past 5 years is only 5.62% (to slow lahhh...) because…
2. Inflation is about 3-4% and might rise higher in years to come. I assume subsidies will be cut. By extreme case cancelling all government subsidies, inflation would double to 6-8%. I will explain how I get this figure next time.
Case Study 1 - Investing my EPF when I retire (case of too
little too late)
Now say for example I retire at 55 with RM1, 000,000 in my EPF account. I decide to withdraw all that money and invest in a fixed deposit earning about 4% a year and live on the yearly returns. That would come up to about RM40 000 per year or RM3000 per month! Not too sure if I can live comfortably with that amount. Remember that’s nearly 25 to 30 years away. Using inflation of about 4% RM3000 is equivalent to RM8000 in 25 years. So I am short of RM5k each month. Seriously, Money No Enough lerrr...
Now say for example I retire at 55 with RM1, 000,000 in my EPF account. I decide to withdraw all that money and invest in a fixed deposit earning about 4% a year and live on the yearly returns. That would come up to about RM40 000 per year or RM3000 per month! Not too sure if I can live comfortably with that amount. Remember that’s nearly 25 to 30 years away. Using inflation of about 4% RM3000 is equivalent to RM8000 in 25 years. So I am short of RM5k each month. Seriously, Money No Enough lerrr...
Case Study 2 - Living on EPF (case of being too old
fashioned)
I decide not to invest but to withdraw all the money from EPF
and keep it under my bed. Instead, I'm going to slowly use that money till I
meet my Maker at about 75 years old (if I live longer then 75, then God help
me!).
With RM1, 000,000 and 20 years to live, I'm allowed to spend an average of RM4166.67 per month or RM138.89 per day. By the way how much does that loaf of bread cost again or a plate of char koay teow? By that time CKY is RM12/plate. Remember that RM8000? Even in this case study 2 I am still short of nearly RM3800.
Obviously bigger income earners tend to contribute more to EPF and should have sufficient money saved up by retirement. Never the less, wouldn't you prefer to live a better and more comfortable life during retirement? Would you not prefer to have the extra to go on an annual holiday with your loved ones? I seriously doubt the same can be said for Case Study 1 and Case Study 2!
With RM1, 000,000 and 20 years to live, I'm allowed to spend an average of RM4166.67 per month or RM138.89 per day. By the way how much does that loaf of bread cost again or a plate of char koay teow? By that time CKY is RM12/plate. Remember that RM8000? Even in this case study 2 I am still short of nearly RM3800.
Obviously bigger income earners tend to contribute more to EPF and should have sufficient money saved up by retirement. Never the less, wouldn't you prefer to live a better and more comfortable life during retirement? Would you not prefer to have the extra to go on an annual holiday with your loved ones? I seriously doubt the same can be said for Case Study 1 and Case Study 2!
Quote: The
Question isn’t at what AGE to retire but at what income level!!
How much can I
save from paying tax if I invest in PRS?
The major selling point of the PRS is non-other than the RM3, 000 tax
relief given. For investors who have invested
into PRS funds, they are eligible to a maximum of RM3, 000 tax relief per year.
As for me, I will be
considering to allocate a small portion for PRS in order to maximize the
benefit of tax relief. I will wait until General Election 2013 concludes before diving into a PRS fund. Perhaps you should do the same?
This is a snippet of a full article from my dropbox area. In there, you can access tonnes of documents. I highly recommend you view them, alternatively you can download the entire folder to your own computer. Internet Explorer is known to have issues, please use Chrome or others. You can view from this link: PRS Info @ Nick's Dropbox
Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.
1 comment:
Great article
Rolek Retirement Strategies CFP®
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