With savings in the Employees Provident Fund, retirees does not need to worry !
According to the EPF Act, the employer must pay his employees’ contributions (KWSP/EPF) and correspondingly the employees also need to contribute part of their wages monthly.
Since March, 2016, the contribution rate for employee age 60 and below, has been reduced from 11% to 8% (optional). To maintain the previous contribution rate 11%, a new submission application has to be made to the EPF office.
For employee age 60 to 75, the contribution rate has been reduced from 5.5% to 4%.
However the contribution rate for employer to employee still retain at 13%.
This purpose of the reduction is to increase the cash flow strength for the member. However, if money is not urgently needed, it is better to save in KWSP account as the paid dividend per year is more lucrative than those save in Fixed Deposit (FD) account.
Available data shows that since 2011, the distributing dividends rate of EPF is not less than 6%!
Our EPF account is divided into two accounts:
Account 1 – Not allow to withdraw until the retirement age;
Account 2 – Allow to withdraw to offset the housing loan, pay medical expenses or educational expenditures.
This is a mandatory savings enforced to help member save for their future retirement. Therefore to encourage members to obtain higher returns, few investment schemes are offered to members through trust funds that been approved. If you want to invest in mutual fund, it is advisable to choose one whose yearly return rate yield is higher than 6%, as the average EPF distributing dividends rate is over 5%.
The sum total amount of the EPF savings can only be withdrawn upon reaching the retirement age.
Why not start investing now using your extra money to invest and reinvest again? That is, let your money works for you.
Creating wealth is not about gaining only, but also knowledge on how to manage and accumulate it.
* Taken from [Create Wealth In Stock Market] investment book
In conclusion, think and act carefully before starting an investment.
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