to accept a large loss and wait till the economy allows your money to turn around and grow exponentially or do you prefer a low-risk investment?

Do you want to control and monitor your investments or would you prefer to leave them to grow on their own?

What are your real needs? Do you require Syariah compliant, life or disability insurance?

The second thing you can do is to start small. Some of the things you can invest in are unit trust funds, mutual funds, stocks or equities, or default investment plans, which are available at any financial institution.

They can start as low as RM50 every month with some initial capital involved. Some institutions or plans are even flexible with their payment schemes, allowing you to put in any amount and at any time.

Again, to better understand them (because understanding them may take some explaining), have a serious discussion with your financial consultant.

In Malaysia, aside from the Employees Provident Fund (mandatory contributions of every employee), the Private Retirement Scheme (PRS) is an obvious choice. Apart from all its benefits, the scheme has an approved trustee that actively safeguards the interests of its members. This is unlike any other investment plans where the risk is entirely yours. Furthermore, the PRS is development with retirement as the end game and not for any other purpose. Therefore, putting your money into this specifically designed retirement plan is safe.

So, after all is said and done, take that first step or just leap. Remember, you are never too young to think about your retirement and it is never too late to start.

SUNDAY STAR, 19 JULY 2015

special

RETIREMENT PLANNING

Start young, go furtherPSYCHOLOGIST Daniel Goldstein uses an interesting analogy to describe how people approach planning and saving for their retirement and why they should start early:

The Greek king Odysseus stands proudly on the deck of his ship, talking to his first mate. He says, Tomorrow, we sail past those rocks where beautiful women called the Sirens sing a song so alluring that all sailors who hear it crash into the rocks and die.

Instead of taking an alternate route to keep all his men safe, Odysseus wants to hear the Sirens sing. He tells his crew that he will pour wax in their ears so they cannot hear the song and that they are to tie him to the mast so that he can listen and the ship can sail by unaffected.

So this captain puts the life of every single person on board his ship at risk, just so that he can hear the song. Because of the danger they are about to encounter, they rehearse for when they will sail past the Sirens.

Odysseus says, Tie me to the mast, and no matter how much I plead, you cannot untie me because then we will all die.

So his first mate ties Odysseus to the mast and Odysseus does his best job at playacting saying, Untie me, untie me. I want to hear that song!

The first mate wisely resists and Odysseus is pleased. He says, Good. I see that you get it. Now untie me and we can have some dinner.

The first mate then unties the king and Odysseus is furious: You idiot! I tricked you! If we were sailing past the Sirens now, we would all be dead. Do not untie me no matter what!

He then throws the first mate to the ground. This scene repeats itself through the night. Odysseus continuously tricks the first mate into untying him and the first mate is continuously beaten mercilessly.

A good lesson to learnIn Goldsteins analogy, Odysseus

is our current self, the one who works hard, earns an income, pays bills and even has people onboard our ship to look after.

The first mate is our future self one that is in retirement, aged, unable to earn an

income, perhaps even ill and weak and continuously being tricked and getting beaten up.

Why? Because our current self is continuously worming our way out of saving or investing and as a result of not saving for our post-retirement years our future self is beaten up mercilessly.

This forces our future self to slog and work hard even with age, beating ourselves up for not making smart financial decisions when we were younger.

We make economic and social decisions over the course of our lives, and we are capable of giving ourselves the right incentives, reminders and rules of thumb to make long-term smart choices rather than short-term fun choices.

Odysseus was willing to put all his men on board at risk just to hear a song that would only provide him short-term satisfaction.

What is our song? What are we doing now financially that will put all the people onboard our ship, including ourselves, at risk, just for a short-lived fun experience?

Do you spend all that you earn and more than you can afford or are you thinking how you can live frugally and grow your money?

Securing your futureThe analogy teaches that though

there are many temptations that offer an enchanting song, we should tie ourselves to a mast, which symbolises a commitment device. This ensures that, against all odds, we do not run after a song that will only provide us temporary satisfaction but instead ensures that we live the retirement years that we deserve.

How do we go about tying ourselves to a mast? Commitment devices can be financial plans or enlisting the help of family members or friends to ensure that we put aside a substantial amount of money for our later years.

The key is to start young. Starting young provides you the leisure to make sound decisions without

the added burden of family and bills. You can put money aside every month with a clear head and no misgivings about you not being able to pay a bill.

Starting young means your biggest asset is time. This gives you the advantage of making the most out of compounding growth. This simply means that the longer you keep at your investments, the more you will accumulate; the longer you wait, the less you will be able to accumulate.

Start planningThe first thing you can

do for yourself is to get help. There are many financial experts out there who are willing to help you with your retirement planning. If walking into a brick and mortar institution intimidates you, then visit financial services websites, such as www.iMoney.my, that simplify financial jargon. Asking friends or family can also work for you.

But before that, ask yourself some serious questions:

How much are you willing to set aside every month?

What is your risk appetite? Will you be able

> SEE PAGE 6

By RACHEL PUNITHA

SPECIMEN

2 retirement planningSUNDAY STAR, 19 JULY 2015

Munirah Khairuddin, chief executive officer of CIMB-Principal Asset Management Berhad.

YOU intend to live a relaxed life during retirement but somehow find yourself constantly on your toes worrying over bills, interest rates and monthly instalments.

Instead of kicking back on a deck chair with a drink in hand, you end up watching your funds dwindle on the ATM screen.

This scenario is not only unfortunate but a very plausible situation facing Malaysias current workforce.

Unknown to many, the amount of money required after retirement can be much higher than expected.

Due to inflation and rising costs, there is the possibility that many are ill-prepared for the high living expenses and will be barely able to pay for basic necessities.

It is for this reason individuals need to begin planning for their retirement as soon as they enter the workforce.

Pension conceptual framework

Since the 1980s, the World Bank has continuously refined a global system design to strengthen social insurance and contractual savings systems.

While there are no universal solutions or simple reform models, a five-pillar framework was created to guide and act as a point of reference in developing income structures for the elderly.

Named Zeroth, First, Second, Third and Fourth pillars, each trepresents various methods in securing income after retirement.

The Zeroth pillar is basic and offers minimal protection for people with low lifetime incomes. This is general social assistance that is financed by the local, regional or national government.

Based on mandatory pre-

Preparing for a costly living

The five-pillar framework is a guide for the elderly to develop income structures.

retirement income contributions, retirees under the First pillar model live off public pension plans that are publicly managed.

Generally financed on a pay-as-you-go basis, this model is subject to fluctuations of demographic and political risks, limiting the overall spending power of the elderly.

The Second pillar covers mandatory contribution plans with independent investment management.

With active or passive investment alternatives and options during the withdrawal phase, this model runs similarly to Malaysias Employees Provident Fund (EPF).

Consisting of a wide range of investment forms, the Third pillar is essentially voluntary personal pension schemes.

Being flexible and discretionary in nature, these plans may also be employer sponsored, with defined benefits or contributions.

The Fourth pillar includes financial support from family, other formal social programmes such as healthcare and housing, as well as individual assets that include home ownership and

reverse mortgages. The World Bank concluded that

individuals should adopt a multi-pillar design model for an effective and efficient retirement income.

Diversify your interests One of the biggest mistakes that

adults make while they are in the workforce is expecting retirement to be the end of worries and financial trouble.

With the EPF being a compulsory component to working life, many workers believe that the funds accumulated will be sufficient for their future after retirement.

This, however, may not always be the case. Take for example the general life expectancy of Malaysians, which is around 75 years of age.

As the countrys current retirement age is set at 60, it can be assumed that people will be living off their EPF savings for about 15 to 20 years after retirement.

As there will always be changes in demographic, political, economic and health factors over extended periods of time, it would be wise for individuals to invest in an additional pillar model as an alternate source of income.

Representing voluntary investment forms within the Third pillar model are assets under management (AUM).

This is where people secure government bonds, company stocks and additional assets of positive economic value and leave them under the management of financial institutions such as mutual funds, venture capital firms or brokerage houses.

These assets include private retirement schemes (PRS) that provide options based on an individuals needs, goals and

Voluntary schemesOPERATING since 1995, CIMB-Principal Asset Management Berhad specialises in Malaysian equities, fixed interest securities and cash investments.

To help clients accumulate larger retirement savings, the company offers two voluntary schemes CIMB-Principal PRS Plus and CIMB Islamic PRS Plus.

Depending on the contributors preference, saving and investing are convenient via either regular or lump sum contributions.

Investors also have the option of managing these funds personally (Do-It-Myself) or allowing the company (Do-It-For-Me) to make all investment decisions.

The Do-It-Myself approach is suited to those who are comfortable with investment concepts and prefer to monitor their retirement investments.

CIMB-Principal also has a retirement scheme for organisations called the PRS Plus Partner Programme, backed by Principal Financial Group, a global retirement expert in corporate retirement plans.

ExpertiseThe companys on-the-ground

presence, integrated quantitative and qualitative research produces superior stocks and bonds or sukuk selection.

Focused on in-depth review processes and consistent performance over time, CIMB-Principal boasts a strong portfolio in risk management.

The company draws global experience, technical expertise and educational resources from its shareholder, the Principal Financial Group.

Founded in 1879 and a member of the FORTUNE 500, the Principal Financial Group has US$530.3bil in assets under management as at March 31, 2015, and serves some 19.9

million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States.

CIMB-Principal PRS Plus and CIMB Islamic PRS Plus schemes:

Adhere to global practices Are managed by CIMB-

Principal, winner of multiple regional fund and asset awards

Provide the latest information updates to investors

Trim investors income tax bill

Invest individuals funds to optimise potential returns

Allow flexibility for investors in choosing the timing, amount and frequency of their contributions

Offer automatic, easy and convenient contribution options

Offer online tracking of investors funds

Encourage persistence in saving and cultivating self-discipline

CIMB PRS Plus Partner Programme:

Offers a perk for employees

Is a proactive move towards corporate social responsibility

Promotes loyalty among employees

Is a tax-efficient way of enhancing organisations total remuneration package

Has no subscription fee or charge to the employer

Has the ability to tailor-make retirement solutions to meet corporate needs

Provide holistic retirement advisory for both employers and employees

risk appetite.The take-up rate for PRS in

Malaysia is currently on the rise and total AUM stood at RM898mil at the beginning of this month.

As the industry is still very much in its infancy, industry specialists are expecting this figure to continue to grow over the next few years.

Educating the publicDue to the lack of awareness and

education regarding the industry, the majority of investors are still unsure what PRS is about.

More education and awareness is required as PRS is a different investment tool that complements EPF savings, says Munirah Khairuddin, chief executive officer for CIMB-Principal Asset Management Berhad.

Among the challenges of introducing the PRS is creating the sense of urgency to save for retirement among the current generation of youth.

This includes getting the public to invest regularly and sufficiently, says Munirah.

In the 2014 Budget, the Government also encouraged retirement saving from an early age when it announced a youth incentive of RM500 for those who accumulate a minimum gross PRS contribution of RM1,000 within a year.

Unfortunately, current incentives are simply not sufficient to entice the public.

The youth incentive scheme is only a one-off payment and the RM3,000 tax relief is only for the first 10 years from assessment.

To continue attracting contributors and sustaining PRS funds, CIMB-Principal has also marketed PRS to employers.

Among other long-term corporate benefits, companies who adopt a matching PRS programme will be able to boost employee retention.

While the industry continues to iron out back-end processes and simplify regulations, individuals who seek additional investment opportunities such as PRS have the advantage of sustaining their respective lifestyles beyond their working years.

Zeroth pillar

State

Base or social

pension

First pillar

Mandatory

Public pension

plans that are publicly

managed

Second pillar

Mandatory

Occupational/ personal pension

plans

Third pillar

Voluntary

Voluntary personal pension schemes

Fourth pillar

Voluntary

Non-financial arrangement/

informal support

World Bank: Pension Conceptual Framework

EPF PRS

3SUNDAY STAR, 19 JULY 2015

4 retirement planningSUNDAY STAR, 19 JULY 2015

LOOK at retirement holistically is advice that Kenanga Investors Berhad (KIB) emphasises when it comes to improving ones financial status.

In the past, retirement was not a common topic to be discussed among friends or family.

Many people believe that the money contributed to their EPF fund will be sufficient to take care of their retirement, but is it really enough?

Financial literacyKIB executive director and chief

executive officer Ismitz Matthew De Alwis says that it is important to know what you are doing.

KIB believes that having financial literacy is the most important ingredient. It also considers the importance of changing mindsets as cultural and behavioural factors often play a role in decision making.

Being financially literate provides the necessary knowledge, skills and tools that foster the confidence needed when deciding how to secure your financial future.

This leads to successfully accumulating, managing and preserving wealth and thus, strengthening your position for retirement.

The point to consider is not how much you will have at the moment of retirement but whether it will be sufficient to cover you over the various phases of your life over the 20 or more years after retirement.

Starting youngA study on financial education in

Asia by the Asian Development Bank indicates that a majority of nations in Asia do not possess a national strategy for financial education and literacy or that the existing programmes are lagging behind compared to other parts of the world.

Most financial education programmes in Asia tend to be small scale and targeted at individual groups rather than the wider population.

Financial education in school curricula is minimal and there are other issues that impede its effectiveness, including a lack of experienced teachers, student motivation and participation of senior members from the financial industry.

This is why KIB works with universities and colleges to nurture the younger generation to be finance-savvy.

Its philosophy is to provide cradle-to-grave financial solutions, including retirement, and to focus on tailoring offerings to the younger, less affluent and potentially less financially literate market.

We want to make sure that young people do not feel intimidated by financial jargon and the complexity of products. They can opt for simpler products first as they have ample time to pursue more ambitious goals. Perhaps start in an equity-based unit trust

The bigger picture of retirement

Kenanga Investors Berhad executive director and chief executive office Ismitz Matthew De Alwis says that diversifying investments is key to growing a sustainable retirement fund.

fund, says De Alwis. Unlike investing directly in

equities, which require investors to have the know-how and time to successfully manage their money, unit trust funds offer investors exposure into the capital market by having their money managed by professional fund managers.

Young investors have a longer time to retirement, allowing them opportunities to invest in more aggressive equity funds to provide them with potentially higher returns to grow their retirement fund faster.

Retirement productsKIB offers a range of retirement

products that cater to various client needs and risk appetites, which is neatly pooled under the Retirement Investment Solution package.

This package is dedicated to retirement planning where various investment instruments are combined to form a holistic portfolio, both conventional and syariah-compliant.

It consists of the EPF Members Investment Scheme, Private Retirement Scheme (PRS) and Kenanga Actively Managed Portfolio (AMP) Plus.

The EPF Members Investment Scheme allows eligible EPF members to withdraw an allowable portion of their EPF savings to invest in EPF-approved unit trust funds.

PRS is a voluntary retirement fund that cultivates disciplined saving to complement the mandatory EPF savings whereas AMP is a service for clients who want the convenience of having a full-time portfolio manager actively managing their retirement funds.

With Kenanga AMP Plus, you are

investing in a basket of funds (a portfolio) carefully selected by a portfolio manager.

The portfolio manager will do all the necessary monitoring selecting, switching and rebalancing of your funds to enhance your investment returns.

Meanwhile, KIB will be redesigning its platforms to provide flexible support to a diverse client base as well as a more satisfying and enjoyable client experience.

Retirement is a long-haul solution and a platform revamp will hopefully enable KIB advisors to deliver personalised and tailored customer experience that clients increasingly expect and establish long-term client-advisor relationships.

Eggs in many basketsDiversifying is the key in good

investments as you dont put everything into one particular asset class or product. It is also important to remember your protection coverage insurance and medical coverage are also equally important and other financial instruments complement your investments, says De Alwis.

Kenanga Groups multi-product KenWealth platform, which houses a range of financial, investment and protection products, is the first-of-its-kind in Malaysia.

The platform is a digital wealth management tool that wraps (termed the KenWrap) different financial portfolios of clients into a single portal.

KenWrap allows access to a persons financial and risk profile while enabling clients to view financial products from multiple providers from a single access point.

l Amount You do not need a significant amount that causes you to forego other important needs. However, it must be a meaningful amount that you are comfortable with. Some experts encourage setting aside 10% of your salary, but there is no hard and fast rule. As you achieve greater financial stability, that amount can be increased and adjusted according to your needs.l Regular It is good to set

aside the amount on a regular basis, be it monthly, quarterly or yearly, and make it a habit to stick to.l Invest Some people choose

to put their money aside and save (for example, in a fixed-deposit) or invest. While there is no harm in saving, investing provides an avenue to potentially grow your money faster than saving. Ensure

that what you invest in is safe, professionally managed and well-regulated. Always consult a professional before investing. l Long-term Retirement

fund accumulation is a long-term process. The amount accumulated, ideally, should not be withdrawn and re-purposed. When you invest for the long-term, it allows your retirement fund to ride through the financial market and any economic turbulences.l For retirement only

If the purpose of building a retirement fund is to finance your retirement, then let it be dedicated only to your retirement. Temptations may compel you to utilise the fund for different purposes but it is important to refrain from doing so.

Keywords in planning your retirement fund

The extensive product range includes unit trust, share trading, private retirement scheme, treasury products, insurance as well as wills and trusts.

It doesnt do any good to just put your money into one channel and expect it to sustain you to the end. There are a great number of ways to make the best out of your money.

However, we often feel that the products chosen by clients do not complement one another. Hence the wrap feature assists clients to consolidate both their asset and wealth management for a clearer assessment of their financial needs, says De Alwis.

KIB also believes that financial planning and the delivery of sound and consistent top performance returns is important.

Its flagship fund Kenanga Growth Fund (KGF) has received the Best Performing Equity Malaysia Fund award for the five-year and 10-year categories at the prestigious Lipper Fund Awards 2015 (Malaysia).

KGF was also awarded the Recommended Unit Trusts Awards 2015/2016 (in recognition of consistent, top-of-the-class performers from fundsupermart.coms extensive list of unit trusts) by fundsupermart.com under the Core Equity Malaysia category.

We are not the financial institution from around the block, but your revolutionary one-stop financial hub that caters to various financial needs, says De Alwis.

n For more information, visit www.kenangainvestors.com.my

5SUNDAY STAR, 19 JULY 2015

6 retirement planningSUNDAY STAR, 19 JULY 2015

High-qualityhealthcare servicesMy Flex Health Group aims to set the benchmark with its services in Malaysia to drive the country forward in the area of healthcare. The company has achieved many successes, particularly within the elderly population, and strives to ensure that Malaysians receive personalised and affordable healthcare by offering a variety of services.

My Flex services the SOCSO rehabilitation Return To Work programme, where My Flex offers professional and personal care in the area of healthcare.

My Flex centre also provides personalised senior homecare services, which is an option besides traditional homecare and residential facilities. Services include medication management and dementia and Alzheimers care.

My Flex also offers skilled nursing services, including diabetes management, post-operative care, wound-care management and terminal illness management.

Its post-discharge care services will ensure your loved ones receive proper care immediately upon returning home from a healthcare facility.

The allied health team also complements these services with physiotherapy, occupational therapy, speech therapy and provide holistic care to your loved ones to improve their quality of life.

Rehabilitation services have also been an essential key component in healthcare and My Flex provides rehabilitation services with a team that upholds the motto of flexibility, suitability and on-demand.

My Flex Nurses Bureau provides a tailored service that strives to meet clients requirements by providing staffing solutions to general practitioners clinics, aesthetic clinics and private and semi-governmental

My Flex provides personalised homecare services for seniors.

Malaysians prepare for the future> FROM PAGE 1Retirement Planning asked Malaysians of varying ages what retirement means to them and their plans to secure their future. Here are their answers.

Mardhiya YasinFinancial associate

For me, retirement means having the freedom to stop relying on a salary. I think anyone can benefit from voluntary simplicity and saving money can be surprisingly.

My spending philosophy is to be fully aware of the differences between needs and wants. Delayed gratification is a virture I have learnt I was a compulsive shopper. When I cut down on my purchases and costs, I realised that I could save a lot of money.

I now regularly put money into my Amanah Saham Nasional Berhad account and I plan to shift my focus to diversifying in the medium term with stocks and mutual funds to allow me to retire early.

Azam AmanPublic relations officer

Retirement means having enough money to do anything, anywhere. To make this a reality, started investing and saving early.

Many often look for immediate returns, whether to be spent on a holiday, an expensive dinner or a

new phone. I spend on these things too but

do so while putting aside a regular amount every month for my retirement. I started small by purchasing stocks and investing into unit trust funds.

The amount that I am putting in now may not seem large, since the high cost of living and lifestyle demands are factors to consider, but I would rather start saving now than later.

Sudharshanth Nair Owner of an SME

For me, retirement means I can relax knowing that my family is taken care of.

I am not middle aged yet but

have to pay for high medical bills and the many things that come with looking after ageing parents.

The questions that haunt me constantly are, What if something happens to me? and Who will then look after me or my parents?

This was why I started investing young. It was confusing at first and I did not understand many things but with the help of financial professionals who were also my good friends, I learnt how to manage my money well.

Datuk Ang Kui HwaFounder of Malaysia Women Entrepreneur Cooperative Holdings Berhad

Retirement to me means being

able to work for value and out of love rather than for the sake of surviving.

I did not do much for my retirement when I started working many years ago; I just saved whenever I could.

My turning point came when someone asked me questions about my retirement that I had never thought about.

Now, as part of my plan, I am slowly letting go of my business for my daughter to take over. Playing the role of advisor also gives me more time to do what I want.

Retirement

also means spending time with my family and travelling and that is why I wanted to ensure that my savings were enough to support that.

Michael Wong Supply chain executive

Retirement is when I can sit back, sip on a drink and enjoy the finer things in life with my family. I am in my 20s now and apart from my regular contributions to EPF, I have also purchased my first property.

The realisation that I had to take action came after reading alarming statistics about people who rely solely on EPF funds not being able to sustain themselves throughout their retirement years after retirement.

My father also taught me about the importance of saving from a young age.

He would find ways and means to save for his retirement even when most of his income was spent on providing for our family.

Saving for retirement is no longer an option, it is a necessity.

hospitals throughout Malaysia. The My Flex recruitment team carefully

selects and trains individuals, matching their qualifications, experience and personalities to clients specific needs.

The My Flex Paramount Wellness Villa is a holistic concept for retirement, rehabilitation and special needs that includes a great array of services and expertise under one roof.

It offers long-term retirement solutions as well as daycare options. The professional staff are experienced and trained in caring for the elderly and can manage daily activities as well as specialist clinical care.

The concept of having a rehabilitation centre and elderly activity centre under one roof has been a well received in Malaysia and has earned Paramount Wellness Villa a well-earned reputation for offering high-quality care in the aged care sector.

n For more information, call 03-2181 5183or visit www.myflexhealth.com

When it comes to saving for the future, Mardhiya Yasin believes in delayed gratification.

Michael Wong realised at a young age that planning for his retirement is a necessity.

Datuk Ang Kui Hwa is slowly transitioning out of her business as part of her long-term retirement plan.

SUNDAY STAR, 19 JULY 2015

retirement planning 7

The Retirement Advisory Service provides EPF members with free advice and guidelines on how they can optimise their EPF savings for retirement.

Preparation begins nowTHE time to plan for your retirement is now when you are working, earning a living, robust in health and sound in mind. It is not to be put in the backseat, only to be thought of when you are about to reach the age of 50.

As retirement draws near, many of you may start to panic, wondering if your savings will be enough to see you through your golden years.

Most likely, your savings will not be enough as you have become so used to your pre-retirement lifestyle and spending habits that the thought of scrimping on them would cause you to tremble.

You tend to underestimate the risks you could face after retirement.

That is why it makes sense to plan early for your retirement, and early means the moment you start your first job.

Fortunately, the Employees Provident Fund (EPF) ensures that 11% of your salary is saved for retirement.

This is in addition to the 12% (or 13% for members earning below RM3,000) contribution by employers.

Good retirement planning takes time and effort.

Whether you prefer to plan it on your own or with the help of a professional, here are a number of reasons it is crucial for you to plan for your retirement now:l Recent data by the EPF

revealed that 68% of members aged 54 have savings lower than RM50,000 and 70% used up their

EPF savings within 10 years. l 50% of former EPF members

exhausted their EPF savings in five years.l 18% of members achieve the

Basic Savings quantum according to age.

Planning early for retirement entails:l Saving early The earlier

you start saving, the more you would have accumulated by the time you retire. There is also the compounding effect in which EPF members can capitalise on dividends to further boost

retirement savings.l Making pre-retirement

withdrawals only when absolutely necessary The EPF allows members to make such withdrawals from their Account 2 for the purpose of enhancing their livelihood and health leading to retirement (browse www.kwsp.gov.my for types of pre-retirement withdrawals).l Having other forms of

savings and protection By placing your eggs in different baskets, you will not have to rely on EPF savings alone to see you through your golden years. Getting

the right insurance protection for you and your family is crucial in cushioning the effect of any unfortunate event.l Spending wisely Live within

your means and control the urge to spend on unnecessary things. Avoid having more than one credit card if you can only afford to pay the monthly minimum amount on one credit card.l Starting small Learn to set

aside money every month for investment purposes. There are some investment plans these days that allow one to invest from as low as RM50.

l Being financially literate Having basic knowledge in managing personal finances will help you have a clear direction when determining your spending patterns.

Conversely, financial illiteracy increases ones risk of making poor financial decisions.l Managing your debt now,

not later Some members have had to use a large portion of their EPF savings to pay off their outstanding debts, leaving little for them to survive on.

Instead of relying on the EPF, learn to use your income to manage your debt.l Seeking professional help

if needed Good advice is not hard to find. The EPF introduced the Retirement Advisory Service (RAS) at its Kuala Lumpur and Petaling Jaya branches to provide members with free advice and guidelines on how they can stretch their EPF savings further.

The service has received positive response where members were given guidance on EPF products such as the Flexi Withdrawal scheme as well as an indication on how much they could accumulate if they were to keep some of their savings in the EPF.

n For more information,visit www.kwsp.gov.my

8 retirement planningSUNDAY STAR, 19 JULY 2015

Benefit from an early startWHEN it comes to saving for retirement, the best advice is to start as early as possible. To ensure that you can enjoy life after retirement is surprisingly easy it starts with planning.

Ideally, planning for your retirement should take place at the start of your career when you are in your 20s.

While this may seem like a daunting feat to do in your 20s, it is doable, achievable and most importantly, it is the best time to start.

There are many reasons for this: it builds a good budgeting habit and the discipline to save money, which is the foundation of money management skills, and it brings about rewarding compounding growth effects.

Compounding growth occurs with a long-term investment (for example, over a period of 30 to 40 years).

This means that those who save and invest long-term will see significant multiplication of funds from compounding growth. The real challenge is actually the first step saving a portion of your monthly salary.

Youth is the prime years of a persons life and the Private Retirement Scheme (PRS) established by the government recognises the challenges and the

need for young adults to save and invest for their future retirement.

Under the PRS, investments can be made with a smaller sum but what is more important is that it becomes a regular practice throughout your working years.

A good beginning is an allocation of 10% of your monthly salary towards the PRS fund. Research by the PPA found that 25-year-olds

who invested 10% of their salary (assuming a monthly pay cheque of RM2,500) in a PRS fund could potentially accumulate RM540,000 by the age of 60.

If individuals start later, such as at the age of 35 or 45, the accumulated balance would be less than that of the 25-year-olds by approximately RM210,000 to RM366,000, which is quite a substantial difference in terms of accumulated returns.

This clearly illustrates that time is of the essence when it comes to starting a PRS account.

Attractive features of the PRS fund include tax relief of up to

RM3,000 for PRS contributions each year as well as the governments PRS youth incentive of RM500 for new eligible contributors.

As your salary grows, you may gradually increase your monthly allocation towards the PRS fund.

This is the basis of retirement planning and it is achievable and can be taken up by anyone.

In terms of PRS funds selection, PRS offers age-based default fund options, which makes it easy for youths to select the type of funds they want based on their current age.

For the youth segment, they can choose the Growth Fund to start with as it is eligible for those below the age of 40.

This type of fund holds equities and has delivered good returns over the long term, making it a

The table shows an assumed total PRS fund gained by individuals who invest 10% of their salary, depending on their age and monthly salary, by the time they turn 60.

25

* Assumptions: Salary increase by 3% and PRS compound growth at 6% till age 60

2,500 250.00 540,000

35 3,560 356.00 330,000

45 4,516 451.60 174,000

Age (years) Monthly salary(RM)

10% PRS contribution(RM)

Total PRS fundat the age of 60

(RM)

suitable investment for young adults.

For those who are more investment-savvy, they can opt to select other PRS funds from non-core funds based on their preference of risk and returns.

Retirement planning is about safeguarding your future and the exciting part comes after you have made the first few steps towards this purpose.

The saying the early bird catches the worm holds true in terms of retirement planning. By Datuk Steve Ong

Datuk Steve Ong is the chief executive officer of Private Pension Administrator (PPA).

n For more information,e-mail AskPPA@ppa.my orvisit www.ppa.my

Those who save and invest long-term will see significant multiplication of funds from compounding growth. Datuk Steve Ong

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