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Plan for your retirement with the guidance of EPF consultants

Plan for your retirement with the guidance of EPF consultants

Senior marketing executive Alila Muhammad did not know how much she could accumulate in her Employees Provident Fund’s (EPF) savings account till she sat down with the fund’s Retirement Advisory Services (RAS) officers recently.

“It was a pleasant surprise to find out that I will have over RM1mil after I’m 55 … that is if I don’t make any withdrawals any from my Account 2 (permitted for down payments or loan settlements, finances for education and medical expenses) in the next 14 years.

“The old adage sikit sikit, lama jadi bukit (mighty oaks from little acorns grow) certainly holds true when it comes to financial management,” said Alila, 41, who earns over RM6,000 a month.

Thanks to the advisory session, Alila is also scrutinising her withdrawals from her EPF Account 1, which she had invested in unit trust over the past six years.

She is learning to compare her returns from her unit trust investments to EPF dividend rates. After her consultation with EPF, she realised that financial literacy is crucial in deciding on her investments.

RAS – launched in 2014 – is an EPF initiative to enhance member’s awareness on the importance of retirement planning.

The service is the first of its kind introduced in South-east Asia. It is to guide EPF members to make informed decisions before making withdrawals from their retirement fund, said RAS advisor Nornisah Mohd Yusof.

EPFs Retirement Advisory Service provides advice to members with regards to financial/retirement planning. Photo: The Star/Norafifi Ehsan

“The service is available to educate members on ways to manage retirement savings and create a sustainable monthly income which can support their lifestyle throughout their golden years,” she added.

RAS was created as 65% of EPF members (age 54 years and above) have less than RM50,000 in their savings.

“Studies show a large percentage of EPF members tend to exhaust their savings within three to five years after retirement (at 55 years old or 60 years old). However, life expectancy of Malaysians is estimated to be 75 years, so many members do not have sufficient funds for their twilight years,” said Nornisah, advising EPF members to accumulate a minimum of RM228,000 by the age of 55.

The 2015 EPF annual report states that about 80% of its active members have an average savings of RM100,000 and less, which is not enough for their retirement needs. Most EPF members find it difficult to manage their funds due to inadequate financial and retirement planning, said Nornisah.

She advised Malaysians to save for rainy days and resist making impulsive purchases.

“It’s your hard-earned money, so save wisely. It’s never too early to start thinking of financial planning. Fresh graduates are encouraged to keep aside a portion of their salary for retirement while those in their 40s and 50s should consider credit management to avoid debt in their retirement.”

Nornisah encourages EPF members to utilise their advisory service for guidance on how to make important decisions on their retirement savings and spending. The service is free.

EPF members can meet with RAS officers who will advise them based on their age, profession and expectations. These officers are knowledgeable about EPF products as well as financial and retirement planning.

They have also been on attachment programmes with other financial advisory agencies such as Bank Negara’s Credit Counselling and Debt Manage-ment Agency (AKPK).

“We calculate member’s expected savings upon retirement and basic needs.

“We try to ascertain their goals, objectives and determine how much is needed post retirement. We usually encourage members to consider monthly withdrawals.

“So far, 19,678 members have visited RAS. Members can access the advisory service by walk-in at the counter or schedule an appointment.

“A two-prong approach is used based on the members’ database. RAS officers focus on retirement planning for members who are above 35 years and the importance of financial planning for those below 35 years old,” she said, adding members with financial problems could seek assistance from AKPK.

It’s never too early to start planning for a worry-free retirement. Photo: Filepic

There are 18 RAS branches across the country, with plans to increase them to 28 in 2017. Besides financial planning, RAS advisors also focus on other EPF services such as its Voluntary Contributions and 1Malaysia Retirement Scheme.

“We have met many members who come to the counters intending to apply for a full EPF withdrawal. However, they often review their decision and opt for flexible withdrawals rather than full withdrawal after meeting RAS advisors.

“There are also members who have made voluntary contributions to increase their retirement savings,” said Nornisah.

From January 2017, EPF will allow retirees to maintain their savings and choose to receive dividends up to the age of 100, instead of withdrawing the entire amount.