EPF helps Malaysians manage their savings through RAS

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Prudent financial planning is critical to ensuring that your retirement plans are sound. File Photo

KOTA KINABALU: Just when you think retirement is too far away, think again.

It is safe to say that retirement planning is not something that people like to talk about.

When Malaysians hear the word ‘retirement’, the first thing that would come to mind would probably be their Employees Provident Fund (EPF) savings.

Everyone knows that the EPF savings can be cashed out at the age of 55. however, it is a little known fact that 65 per cent of EPF members, who are 54 years old, have less than RM50,000 in their savings.

What is even more frightening is that most EPF members would usually spend their entire EPF savings within three to five years. This would surely not be enough as the average life expectancy for Malaysian is 75 years.

Fortunately, the EPF has paved the way for Malaysians to manage their savings the smart way through its Retirement Advisory Service (RAS).

RAS is an initiative of the EPF that provides generic, non-investment advice to its members with regard to financial/retirement planning to better prepare them for retirement in the perspective of EPF.

Ultimately, RAS aims to increase awareness and knowledge on the importance of financial planning meant for retirement.

In giving its services, which also happens to be free-of-charge, RAS will be providing insight to help members make the right decision.

RAS advisor Janaith Lee told The Borneo Post in an interview that based on EPF’s Basic Savings, you have to accumulate a total of RM228,000 in your total EPF savings in order for you to maintain a sustainable lifestyle.

“Basic Savings is a pre-determined amount set according to age in Account 1 of your EPF savings to enable members to achieve a minimum savings of RM228,000, when they reach 55.

“For example, when you reach the age of 25, you are expected to have at least RM14,000 in your Account 1,” Janaith said.

She added that Basic Savings was calculated based on the minimum government pension of RM950 per month. The Basic Savings table is available online at www.kwsp.gov.my official along with a specialised calculator that will help you keep track with your savings.

“The EPF calculator is for you to basically forecast how much you will get when you reach the age of 55. Would you reach the minimum standard of RM228,000?” Janaith said.

The calculator will take into account all your details such as your age, expected retirement age, current salary and several other factors. Although the amount stated in Basic Savings serves as mere guideline for its members, Janaith stressed that it is highly advisable for its members to reach the benchmark amount.

“Also, it would be better if a person has other savings elsewhere, as this would prevent that person from depending too much on their EPF savings,” she said.

Janaith added that every EPF member would have two accounts, namely, Account 1, which makes 70 per cent of the total savings and Account 2, which makes 30 per cent of the total savings.

“Savings from Account 2 can be taken out at any time as it may be used for Haj, PTPTN loans, other education loans, housing loans and medical loans.

“On the other hand, savings from Account 1, can only be taken out once a person has reached the age of 55. Simply put, Account 1 can be classified as one’s ‘retirement savings” and Account 2 can be classified as ‘pre-retirement savings’,” she said.

Janiath disclosed that EPF has also provided its members with a scheme called Flexi Withdrawal at 55, a scheme which aims to help retirees better manage their savings.

“When you reach the age of 55, RAS will provide you with choices and facilities on how you can withdraw your savings,” Janaith said. — Bernama