Would you like the money to work for you?

As at Dec 2006, there are RM224 Billion in EPF while average contribution amount for a 55 years old contributor is RM110K. If this EPF contributor expected to live for 75 years old, he can only spend RM475 per month. And he is categorised as ‘poor’ resident so long the monthly income does not exit RM530 in Malaysia. A survey by the EPF found that a contributor on average, exhausted his EPF money within three years of withdrawing the lump sum. Thus we can often see many old folks continue to work even reaching 60 years old. I know what you think; you should have much bigger amount than RM110K when you approaching retirement age, but bear in mind, the amount may not be a lot, say RM500K if we continue to make use of it for housing, education and medical. And who knows, the RM500K after 10-20 years, because of the inflation, could be as valuable as the RM110K today. People forget about the inflation. Things has change generally, from one working father to support 7 kids, to 1 working couple to support 3 kids. The FD rate in Malaysia hit the highest of 9.06% in 1997, and drop ever since that to as low as 3.2% in 2002. And after another 7 years, FD rate drop to 2.5%. Whereas the inflation hit high of 8% in last June and now at more than 6%. As no body can avoid the inflation, there is no other way than investing to overcome the inflation. According to ‘Investopedia’, the definition of ‘investing’ is : you can’t create a dupicate of yourself to increase your working time, so instead, you need to send an extension of yourself - your money to work for you. Quite simply, making your money work for you maximizes your earning potential whether or not you receive a raise, decide to work overtime or look for a higher paying job.

According to financial planner, as long as there is an emergency fund backed up for 3-6 months of our expenses, one should consider to start investment. Putting too much money in the bank will not help to grow our wealth. It is advised to allocate 10% - 20% of our income for investment. With current expenses of RM32K per annum, which is about RM2.7K per month, assumming no additional expenses during the retirement age, because of 4% inflation, we will have to spend for RM85,307 per annum, which is not less than RM7K per month after 25 years. In other words, if you are spending RM2.7K a month, and you are now 33 years old, please make sure you have RM1.5M when retire at 58 years old with 75 years life expectancy. The number could be more with higher inflation, higher medical expenses and travel expenses. Personally i do not wish to just stay at home in my golden years.