Professional Documents
Culture Documents
Personal Financial Retirement Plan
Personal Financial Retirement Plan
Personal Financial Retirement Plan
01 introduction
Respondents’ background
Respondent 1
Millennial
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Investment Loan
EPF • Single Car loan
• Chinese
• 0 dependent
Respondent 2
Non-
Millennial
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Investment Loan
EPF, PRS, Bonds, ASB • Married Housing, car, credit
and Unit Trust • Malay card loan
• have 4 child
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02 7 steps to fund respondents’
retirement need
Respondent 1
Step 1: Set Goals
Based on our interview, the following are the goals that the respondent
wants to achieve in the future:
● Retire at the age of 60 years old
● Save for children’s future education fee
● Travel locally twice a year.
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Step 2: Estimate how much they will RM
need
Respondent 1 A. Present level of living expenditures on a before-tax
basis
37,068.00
• We estimate that his annual expenditure will be
80% of what he is spending now. B. Adjustment for Base retirement expenditure in 0.8
today's dollars
• Since his only income after retirement is EPF,
C. Equals: Annual living expenditures at retirement in (Line A 29,654.40
there is no tax adjustment needed to be made.
today's Ringgits on a before-tax basis x Line
•
B)
The inflation rate is expected to be 4% and is
taken into account as it affects the investment D. Before-tax adjustment factor / -
plans to be made.
E. Equals: The after-tax income necessary to cover the = 29,654.40
• Respondent 1 also has plans to travel locally annual living expenses in line C
after retirement to places such as Sentosa,
Penang or Pulau Langkawi. F. The inflation adjustment for calculating the future FV 96,181.01
retirement expenses.
• We expect him to need at least RM10,000 per
year for the travelling expenses. G. Plus or minus: Anticipated increases or decreases in
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• To estimate the amount needed to cover the shortfall Step 5: Calculate How Much RM
in present time, we will need to consider the inflation They Need to Cover This
adjusted rate of return. Shortfall
• Respondent 1 only has EPF as his income, thus the R Annual Inflation-Adjusted Shortfall Line 60,099.2
. Q 0
interest rate used will be 4.1%.
S Equal: Present value of Total funds needed at = 809,582.
• The total funds in present value needed to cover for . retirement to finance the shortfall (Refer to Table 72
2.1.4)
the shortfall is RM809,582.72.
Respondent 1
• There are 30 years left until retirement
for Respondent 1. Step 6: Determine How Much They RM
• Must Save Annually Between Now and
Respondent 1 will need to save
Retirement
RM7,016.53annually to cover for the
shortfall. T. Present value of Total funds needed at Line 809,582.72
retirement to finance the shortfall R
• Although the figure for annual savings
is quite high as respondent 1 currently U. Annual Saving to cover for shortfall PMT 7,016.53
does not have that much free money, but (Refer to Table 2.1.5)
he has the potential of increment in
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expenditures after retirement
Travelling expenses + 15,000.00
• Mongolia - RM7,000
H: Equal: Anticipated inflation adjusted expenses needed after = 65,559.37
• South Africa - RM7,300
retirement • Tibet - RM4,800
Step 3: Estimate Income at retirement
RM
I. Total fund in PRS in today’s Ringgits 40,000.00
J. Total fund in EPF in today’s Ringgits + 11,500.00
K. Total fund in Malaysian Government Bonds in today’s + 50,000.00
Ringgits
L. Total fund in ASB in today’s Ringgits + 200,000.00
M. Total fund in Unit Trust in today’s Ringgits + 200,000.00
N. Plus: Pension benefits in today’s Ringgits + 0.00
O. Other passive income in today’s Ringgits + 0.00
P. Equal: Expected retirement income in today’s dollars = 501,500.00
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= Total of weighted ratio x rate of return Employees Provident Fund (EPF) 11500.00 0.022 8.10% 0.18%
Malaysia government bond 50000.00 0.100 4.50% 0.45%
= (0.80x1.52%) + (0.022x8.10%) +
Amanah Saham Bumiputera (ASB) 200000.00 0.399 4.25% 1.69%
(0.1x4.50%) + (0.399x4.25%) +
(0.399x0.65%) Unit Trust - RHB Retirement Series - Islamic
Balanced Fund 200000.00 0.399 6.50% 2.59%
= 5.03% Total/ Weighted average interest rate 501500.00 1 5.03%
Inflation
Rate: PMT PMT = (rate, n , FV)
Types of Investment FV (RM) ROI 4% (RM)
Private Retirement Schemes (PRS) 48,667 1.52% -2.48% 2,111.88
rate = ROI - Inflation rate
Employees Provident Fund (EPF) 31,654 8.10% 4.10% 2,520.84
Malaysia government bond 88,610 4.50% 0.50% 5,159.90
n = 18years
Amanah Saham Bumiputera (ASB) 343,573 4.25% 0.25% 19,543.91
Unit Trust - RHB Retirement Series - Islamic
Balanced Fund 453,497 6.50% 2.50% 31,595.21
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Step 5: How Much They Must Save Annually Between Now and Retirement
V. Annual Inflation-Adjusted Shortfall Line U 4,627.64
PV = RM75.676.58
W Equal: Present value of Total funds needed at = 75,677.52 PMT = RM4627.58
. retirement to finance the shortfall (Refer to Table I/Y = 1.03%
N = 18 years
2.2.5)
Step 6: Determine How Much You Must Save Annually between Now and Retirement
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X. Present value of Total funds needed at retirement to Line M 75,676.58
PMT = RM4624.23
finance the shortfall
I/Y = 5.03%
Y. Annual Saving to cover for shortfall = 4,264.23 N = 13 years
(Refer to Table 2.2.6) FV = RM75,676.58
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recommendation
03
Respondent 1: Private
Retirement Scheme (PRS)
Public Mutual PRS Equity Fund (PRS-EQF)
• Obtain long-term capital growth that might surpass or
keep up with inflation after retirement
• Invest in:
a. Blue-chip Stocks
b. Index Stocks
c. Growth Stocks
d. Stocks of Initial Public Offering Companies
e. Unlisted Equities
f. Warrants
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g. Collective Investment Plan
• Average return in 5-years is 4.76%
• N=30, Payment = RM9,000 Annually (RM750
monthly)
• FV = RM573,881.70
Respondent 1: Bonds
Malaysian Government Securities (MGS)
• Biggest and most advanced bonds in the markets of
Malaysia
• Provide the most stable income
• Provide diversification
• Expected dividend return of 4.50%
• N=30, Payment = RM9,000 Annually (RM750 monthly)
• FV = RM549,063.63
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Respondent 1: Summary
● Total Shortfall in Present Value = RM809,582.72
● Future Value from PRS = RM573,881.70
● Future Value from Bonds = RM549,063.63
● Total Return from Both Investments = RM1,122,945.33
● Risk from Portfolio = Systematic Risk, Liquidity Risk,
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monthly)
• FV = RM42,762.78
Respondent 2: Stocks or
Shares
Tenaga Nasional Berhad
• Blue-chip stocks and Income Stocks
• Dividend pay-out is twice per year
• Average dividend yield in 3-years is 5.94%
• Dollar-Cost Averaging method
• N=13, Payment = RM2,400 Annually (RM200
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monthly)
• FV = RM45,142.88
Respondent 2: Summary
● Total Shortfall in Present Value = RM75,676.58
● Annual Saving = RM4,264.23
● Future value from PRS = RM42,762.78
● Future value from Stocks or Shares = RM45,142.88
● Total Return from both investments = RM87,905.66
● Risk from portfolio = Systematic Risk (Interest Risk & Currency risk)
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04
Conclusion
Conclusion
Respondent 1 Respondent 2