36 Questions
What is Mr. A's target retirement fund?
RM828,000
How many years does Mr. A have to save for retirement?
20 years
What is the monthly savings needed if Mr. A starts saving at age 35?
RM1,883
What is the investment return per annum assumed in the calculation?
6% per annum
How much would Mr. A need to save monthly if he starts saving at age 20?
RM625
At what age does Mr. A want to retire?
55 years old
What is the basis for calculating the rate of gratuity and pension?
Number of months of reckonable service and last drawn salary
What is the formula for calculating the gratuity?
7.5% x number of months of reckonable service x corresponding last drawn salary
What is the formula for calculating the pension?
1/600 x number of months of reckonable service x corresponding last drawn salary
What is the purpose of the Compulsory Retirement at the Instance of the Government Under Section 11 Act 227/239?
To force the retirement of an officer
What type of pension is paid to an officer who retires due to privatization of a government agency?
Pension Under Sections 10(5)(b), 12 and 12A/13 Act 227/239
What are the three types of pension benefits available to a retired officer?
Service Pension, Service Gratuity, and Cash Award
What percentage of mandatory contribution is credited to Akaun Persaraan?
75%
At what age can members withdraw from Akaun 55?
55 years old
What is the purpose of self-contribution?
To voluntarily grow retirement savings with EPF
What percentage of mandatory contribution is credited to Akaun Fleksibel?
10%
What is Akaun Emas?
An account that exists after a member reaches 55 years old
What can be withdrawn once a member reaches 60 years old?
Akaun Emas
What is Akaun 55?
A combination of Akaun Persaraan, Akaun Sejahtera, and Akaun Fleksibel
What percentage of mandatory contribution is credited to Akaun Sejahtera?
15%
What is the maximum pension of a public service officer after a service of 30 years or 360 months of reckonable service?
Three fifth of the last drawn salary
What is the purpose of Service Circular No 4 of 1993?
To provide cash award in lieu of leave for public service officers
How is the Cash Award in lieu of Leave (GCR) calculated?
1/30 x (basic salary + fixed allowances) x no.of leave accumulated
What is the contribution rate of an employee to the EPF?
7%
What is the purpose of the Employees Provident Fund (EPF)?
To help the Malaysian workforce to save for their retirement
What is the tax relief for contributions to the Private Retirement Scheme (PRS)?
RM3,000
What is the contribution rate of an employer to the SOCSO?
1.5%
What is the minimum number of years of service required to qualify for maximum pension?
30 years
What is the main benefit of taking advantage of the time value of money?
To have a larger nest egg in the future
What is the estimated amount of money a person will have at age 65 if they invest $300 a month from age 25 to 65?
$1.4 million
Why are private pensions (EPF) and Social Security often insufficient for retirement?
Because they may not cover the cost of living
What is one of the risks of inflation on retirement savings?
It decreases the purchasing power of money
What is the first step in retirement planning?
Set retirement goals
What is one of the main reasons people need to plan for retirement?
Because people are spending more years in retirement
What is one of the potential uses of retirement savings?
To cover for any medical costs
What is the effect of waiting to start investing until age 35?
The nest egg will be smaller
Study Notes
Importance of Starting Early
- It's essential to start saving for retirement early to take advantage of the time value of money.
- Delaying retirement savings can significantly reduce the amount of money saved by age 65.
Calculating Retirement Savings
- To calculate the estimated retirement savings, consider factors such as age, target retirement fund, and investment return.
- If Mr. A starts saving at age 20, he needs to save RM 625 per month to reach his target retirement fund of RM 828,000 by age 55.
Building Up Your Nest Egg
- Effective retirement planning involves setting retirement goals, estimating available sources of funds, and constructing an investment plan.
- Factors to consider when planning for retirement include daily expenses, medical costs, and settling debt.
Types of Pension Schemes
- In Malaysia, there are two main types of pension schemes: JPA (Jabatan Perkhidmatan Awam) and Private Sector (EPF).
- JPA pension schemes include Compulsory Pension, Compulsory Retirement, and Optional Retirement.
Pension Benefits
- Pension benefits under JPA include Service Pension, Service Gratuity, and Cash Award in lieu of Leave.
- The rate of gratuity and pension depends on the period of reckonable service and the last drawn salary.
Employee Provident Fund (EPF)
- EPF is a mandatory retirement savings scheme for employees in Malaysia.
- Contributions are credited according to a breakdown: Akaun Persaraan (75%), Akaun Sejahtera (15%), and Akaun Fleksibel (10%).
Mandatory Contribution
- Members who have reached 55 years old will have two accounts: Akaun 55 and Akaun Emas.
- Akaun 55 is a combination of Akaun Persaraan, Akaun Sejahtera, and Akaun Fleksibel that can be withdrawn once a member reaches 55 years old.
Self-Contribution
- Self-contribution serves as an option to voluntarily grow retirement savings with EPF.
- It allows individuals to contribute more to their EPF account to increase their retirement savings.
Calculate the estimated savings needed to reach your retirement goals. Start planning early to achieve financial stability.
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