Retirement planning is the most important task in financial planning. When you retire, the income stops all of a sudden while the expenses keep increasing due to the effect of inflation. The medical expenses also tend to rise after the retirement due to increase in age. All these factors make retirement planning a necessary task so that you can lead a peaceful life after retirement. There are number of ways to accumulate the fund to be used after retirement like fixed deposits in banks, investing in mutual funds and subscription for epf investment for retirement financial planning.
Investing in Employee Provident Fund also known as epf in short form is compulsory for Malaysian citizens who work in the private sector. It is optional for persons who are not Malaysian citizens. The employees contribute a fixed amount of their monthly salary to their epf accounts. The employer also contributes the equal amount to the employees account. This helps the private sector employees to accumulate a decent fund which can be used at retirement. They can also withdraw a certain portion of the fund to meet certain unexpected expenses before the retirement. The employee’s contribution should be a minimum of 11% of the monthly salary and the employer’s contribution should be 12% of the monthly salary. The epf board pays dividends to the members every year depending upon the profit earned by investing the sum in organisations permitted by the government. The epf offers low returns when compared to other investments like mutual funds and stock markets as its main purpose is to safeguard the fund of the members, so that they have a decent corpus for retirement.
As epf is a retirement plan, members are allowed to withdraw from the fund only after they cross 50 years excepting some serious circumstances like injury and disablement where they are allowed to withdraw from the epf fund before 50 years. Only 30% of the epf corpus can be withdrawn at 50 years by the members. The remaining amount can be withdrawn only after they cross 55 years. Members can choose to remain invested even after 55 years. In the case of untimely death of the member, the epf benefits are given to the nominee of the account holder.
Financial planning is an important aspect for any individual. It is very important to inculcate responsible spending habits and the habit of saving for a rainy day. If you do not understand the financial jargons and have no idea of investments and returns consult a certified financial planner who will be able to plan a perfect financial strategy and diversify your savings into different instruments like mutual funds and stock market for systematic and faster returns, insurance policies to cover unexpected risks and epf investment for retirement planning. The professionals also help in understanding the various terms and conditions related to financial instruments and suggest the best suitable investments depending on your risk profile.
Retirement planning is very important for individuals as it is a time when the income stops and expenses start rising. The early we start retirement planning, the higher the corpus we can accumulate.