Retirement goals: M'sians want to settle debts with EPF fund

11 Nov 2016 / 14:56 H.

    GEORGE TOWN: Every Malaysian has his or her own retirement goals but not all are well prepared for retirement due to several constraints and obstacles.

    Some Malaysians will have to rely on their Employees Provident Fund (EPF) once they retired while others may have invested in other financial products like private retirement schemes or Amanah Saham Bumiputera.

    Those who rely on their EPF for retirement, wish to make good use of the fund to settle off their debts, allocate some for medical needs, provide some for social engagements like going out with friends, eating out and other leisure activities.

    A Mathematics teacher at Penang Free School Lim Weng Seong, 58, who joined the civil service in 1982, said in those days, a government servant must contribute up to 10 years to EPF before they were eligible to be placed under the government pension scheme.

    "I wish to use most of my EPF fund to settle all my loans when I stop working in two years. Despite only contributing to EPF for the first 10 years, I have utilised my account as my saving account with personal contribution after switching to pension scheme," he told Bernama here.
    Lim said he would try to contribute extra money from his monthly salary into his EPF account due to its high interests.

    He will also use his gratuity and golden handshake money to support his children to pursue their tertiary studies, allocate some for personal insurance and invest a little bit in other private retirement scheme.

    "By the time I retired, I may consider working as a part time tutor if the fund that I have saved isn't enough to support my daily routine," he said, adding that one is allowed only to voluntarily contribute RM5,000 monthly and RM60,000 annually to EPF.

    He said due to the high six percent interest rate, many of his colleagues had opted for the EPF account rather than the conventional bank account.

    "I have faith in our EPF in managing the fund, that's why I'm leaving my money in the account," he said.
    Last month, EPF announced that the quantum for the basic savings will be revised from RM196,800 to RM228,000 effective Jan 1, 2017 and the amount would be set as the minimum target EPF savings that members should have when they reach age 55.

    However, a new EPF member Mohamed Basyir Mohamed Ibrahim, 25, said his main retirement goal was to be able to settle all his loans, including housing loan, vehicle loan and other personal loan with the fund.

    With the increase in living cost and skyrocket property prices, he is worried that the fund in EPF may be insufficient for him to do all on his wish list by the the time he quits working.

    "I just started contributing to EPF last year and I can't solely rely on the fund. I may need other private investment schemes for me to achieve my retirement goals and be able to survive," he said.

    According to the EPF data, it revealed that most EPF members spent all their money within three years upon withdrawing their savings.
    On financial planning, Basyir said he would allocate some portion of his money for expanding wealth (savings, asset accumulation) and protection (insurance) when the time drew close to the retirement age.

    "Only by doing this that I will have a lifetime stream of income to support my lifestyle based on the compounding interest. I may also consider cutting down on daily expenses, downsizing my house and if necessary save a portion for medical needs," he said.

    Basyir, who currently works as a journalist at a daily newspaper in Penang, said employers in the public and private sectors should send their staff for financial retirement planning seminars to help them prepare their retirement savings at an early age.

    According to the EPF Annual Report 2015, only 24,458 of 14.55 million EPF members have savings exceeding RM1 million.

    This year, the latest survey found that only 958,100 out of 13 million contributors, or 7.37%, have more than RM150,000 by age 55.

    Shockingly, 90% of rural households and 86% of those in urban areas have zero savings. — Bernama

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