TMI: For many, EPF nest egg may not last the distance

For many, EPF nest egg may not last the distance

TMI: January 12, 2013

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