MEDICAL BANKRUPTCY

Can a person actually be bankrupt cause of medical situation?


You BET! If you are not prepared to reduce or eliminate this risk, you may as well transfer all your assets to the Doctor now cause it will only be a matter of "when", not "if".

The STAR (Saturday March 27, 2010)



ACCORDING to the United Nations’ projections, there will be about 1.2 billion people aged 65 years and above by 2025.


With numbers such as these, failure to address our health needs today could develop into a costly problem tomorrow.


As our affluence swells, our expectations of better healthcare, financial independence and a peaceful death increases.


But due to the high cost of healthcare, only a few can afford to become seriously ill.


While immediate concerns about rising healthcare costs and retirement fund structure require attention, fundamental long-term questions should not be neglected.


There is urgent need to address what will be very expensive demographic shifts within our lifetime.


The biggest risk


Unless you are among the lucky few with lifetime healthcare coverage, you may need to bear major medical expenses during retirement. Should you need assisted living while ageing, you would enter a whole new world of long-term financial pain.


Those who have seen it happen to family members or acquaintances know first-hand that the unpredictability of our personal health is the biggest risk in retirement planning. It is a nightmare that is unforeseen and rarely controllable.


According to the World Economic Forum 2009 report Transforming Pensions and Healthcare in a Rapidly Ageing World, the question of ageing societies from a perspective that integrates implications and solutions for both healthcare and retirement pensions was addressed.


In taking this integrated approach, which emphasised multi-stakeholder collaboration, the World Economic Forum was reacting to rising concern expressed by financial services and healthcare companies, employers, governments and society.


However, no single stakeholder can hope to tackle the challenges or make the most of the abundant opportunities. Success will require diverse, multi-stakeholder collaboration and innovative approaches.


How much is enough?


With the timing of this report, we are presented with a once-in-a-generation opportunity for transformational change in retirement planning for many of us in Malaysia.


There is a need for hybrid solutions to address the increasing cost of medical and healthcare products and services.


After all, illness or sickness can happen to anyone at any time. We can experience possible medical bankruptcy at any age but the worst time to experience it is during old age. Such financial depression could end our life earlier than expected.


The million dollar question: How much is enough when medical costs could be escalating at double-digit inflation rates as we age?


It is almost impossible to calculate as the amount required is subject to unpredictable variables like types of illness, medical fees, medicine costs and more.


Concerted effort from everyone


The ability for Malaysians to ensure financial sufficiency for medical and healthcare during retirement is becoming severely reduced due to skyrocketing medical costs.


A concerted effort from different stakeholders is necessary. An effective collaboration between the Government, insurance companies, pharmaceutical firms, healthcare providers and the community to keep the financial support and aid within affordable limits is required. Initiatives from all stakeholders are also required:


•Individuals should start early with personal savings, contribution to Employees Provident Fund, life and medical insurances and investments for old age care;


•Employers should consider medical benefits for individuals under employment beyond retirement age;


•The Government should provide medical and old age care subsidies and assistance, and tax incentives to make private health and medical care affordable;


•Insurers should provide affordable medical and age care insurance that caters for specific needs and age;


•Price management is required on private health and medical advice, services, and products (food and medicines) to make them affordable; and


•Family and community assistance should focus on the provision of home care, nursing help, food, accommodation and emotional support with love, care and affection.


These ideas and strategies may not be comprehensive. Neither are they overnight solutions. They need adequate research studies and timely and appropriate decision-making processes from relevant parties.


The private sector can still benefit by catering to the needs of the elderly and the Government can facilitate old-age security while helping to overcome financial pressures on private healthcare systems and retirement plans for current and future generations.


In the bigger picture, it can be a collective and meaningful corporate social responsibility effort and initiative to turn a “greying society” into a “silver society”, in which the elderly live their golden age without financial worries associated with ageing and ill health.

Ways to Save for SME, Sole Prop & Partnerships

The STAR (Sunday March 28, 2010)


Consider claiming “home office” expenses, for example, electricity, telephone bills, quit rent and service charges of apartments. If the business owner pays rent for the working area, it can be deducted from the business income. This applies to rent that is paid to a spouse who owns the home but is not involved in the business.

Plan in advance when making capital expenditure (purchase of fixed assets for the business).

Purchase fixed assets for the business before the end of the financial year to qualify for capital allowance that can be used to reduce the business’ taxable income.

For business owners who travel extensively by road, consider buying a car registered in the proprietor’s/company’s name which will allow the business to claim capital allowance limited to the percentage of the car’s use for business purposes.

Have proper documented processes to maintain trade receivables. Active participation in trying to recover trade receivables which become bad debts subsequently are allowed as a deduction against business income.

For family-owned businesses, consider contributing to EPF where family members are employees of the business. EPF contributions by businesses are tax deductible against business income, limited to 19% of the employee’s remuneration.

When making donations, consider cash contributions to approved institutions and to the Government. Cash donations made to approved institutions and the Government are eligible for a tax deduction of up to 10% of the aggregate income for a company and up to 7% of the aggregate income for any person other than a company.

Fulfil the obligatory zakat perniagaan. Small businesses which contribute obligatory zakat perniagaan to an appropriate religious authority are eligible for a deduction of up to 2.5% of the aggregate income for the particular year of assessment. Individuals with business source (i.e. sole proprietors) on the other hand will get a rebate on such obligatory religious dues paid against the tax payable.

Consider expenses which may qualify for double deductions. Malaysian resident companies can claim a double deduction on approved outgoings and expenses incurred for the promotion of exports from Malaysia, for example, costs for advertisements in any media outside Malaysia, direct costs attributable to approved trade fairs held outside Malaysia and expenses incurred for participating in virtual trade shows.

For small businesses which export or import via cargo, double deductions are allowed against the insurance premium paid for the cargo insured with local insurance companies.

Ensure proper records and documentation are kept by small businesses. They are important in supporting claims for deductions to avoid disallowances which may lead to unnecessary penalties imposed during tax audits.

Trading stocks are assets to the business and are only allowed as deduction when the stocks are sold. A sole proprietor may consider using a stock evaluation policy to revalue and write down the quantity or quality of the unsold stocks that are due to obsolescence and claim a tax deduction accordingly.

Sole proprietors who wish to use their stocks for personal use or as gifts may request for a direct billing by the supplier to his personal name instead of through the business enterprise. If financing for the purchase is required, this could be arranged under his own capacity.

Trading stocks are assets to the business and are only allowed as deduction when the stocks are sold. A sole proprietor may consider using a stock evaluation policy to revalue and write down the quantity or quality of the unsold stocks that are due to obsolescence and claim a tax deduction accordingly.

Sole proprietors often have a mixture of personal spending such as telephone bill, entertainment and motor vehicle expenses in their business accounts. The expenses are to be apportioned into business and private expenses. From a practical viewpoint, ratios such as percentage or quantum in the forms of 1/3 or 1/4 for private use are added back to tax depending on the business and personal conditions.

BUSINESS VALUE PROTECTION

1. Do you own a business (i.e. sole proprietor, partnership, sdn bhd)?
2. Are you concerned with the survival of your business in the event of something happens to you or partner(s)?

Purpose :

1. To protect the value of your business when one business owner exits.
2. To provide for the smooth transition and continuity of business interests to the surviving business owners when one of the shareholders pass-away, suffers from critical illness or total permanent disability.

Issues will arise when a business owner exits, in particularly upon the untimely death/critical illness/total permanent disability of a business owner. Among them are:

1. Inheritance by heirs – are the heirs capable or interested in the job?
2. Difficulty in selling the business interest – does fire sale ever attracts fair value?
3. Financial difficulty for the family – potential lack of funds to meet financial obligations?
4. Serious disruption – inclusion of outsiders or inexperienced heirs may cause havoc to business
5. Closure of business – surviving business owners may decide to abandon business and start afresh

What are BENEFITS of a Business Value Protection?

1. Guarantees full and fair value

2. Pre-agreed pricing

3. Quick and smooth transfer

4. Conversion to liquid income

5. Independent referee to execute the necessary transfers

6. Business continues as normal without disruption

7. Prevent wastage of sale proceeds

Business Value Protection is a MUST-HAVE for all businesses.

How to do it?

For more information, please do not hesitate to ask for a free consultation from NICKG Advisory Services, nickg74@hotmail.com (or) gloriouscash@live.com

TAX - More Ways to SAVE

1. The higher-income spouse should claim child relief.


2. File separate assessments for husband and wife and claim tax reliefs individually. Generally, when one spouse does not work (and has no other source of Malaysian income), or has total income not exceeding RM3,000, it is beneficial for the income-earning spouse to elect for a combined assessment which entitles him/her to the RM3,000 spousal relief.

3. Claim direct expenses against rental income. Examples of direct expenses include interest incurred to finance the acquisition of the property, repairs and maintenance and so forth. Note that direct expenses in¬¬curred prior to letting of the property is not claimable.

4. Claim the medical expenses (limited to RM5,000) incurred for parents. Should the parents’ medical bills be shared among siblings, the amount expended by each sibling (up to RM5,000 each) would be their respective relieveable entitlement and sufficient evidence of payment must be maintained by each sibling.

For example, in a case when the receipt is in the name of the patient, the individual making the claim must obtain an endorsement on the receipt by the doctor to certify that medical charges were paid by him.

5. Claim medical expenses for the taxpayer, spouse and children on serious diseases up to RM5,000. This includes complete medical examination expenses of up to RM500.

6. If your job function requires you to travel extensively and your yearly travel allowance/toll is more than the standard tax exempt amount of RM6,000, you can review your travels to claim further deduction. Further de¬¬duction can only be claimed if you can provide records for your total claim.

7. If you are entitled to yearly leave passage as an employee, claim the following against your leave passage benefit:

> Travel (includes fares, meals or accommodation) within Malaysia for your family up to three trips.

> One overseas travel (fares only) for your family.

8. Foreign-sourced income is not taxable even if it is remitted into Malaysia. So you are not required to report such income in the tax returns. Examples of such income is rental income from properties located outside Malaysia and employment income arising from an employment exercised outside Malaysia and not incidental to the Malay¬sian employment.

9. In case either you or your spouse has tax overpayments, you can request the Inland Revenue Board (IRB) to transfer the credit to offset the balance of tax either one of you is required to pay. This will improve the cash outflow of your family.

10. Effective from 2009, you can claim interest up to RM10,000 a year which is paid on housing loans for three consecutive years from the first year the housing loan interest is paid. The claim is subject to the following conditions:

a. You are a Malaysian citizen and a tax resident.

b. Limited to one residential house including flat, apartment or condominium.

c. The sale and purchase agreement is executed between March 10, 2009 and Dec 31, 2010.

d. You have not derived any income in respect of that residential property.

Tax - Can you SAVE on your taxes?

With a little more effort and more knowledge of tax laws, we can all SAVE on our taxes, especially businessowners

The STAR (Sunday March 21, 2010)

The tax man cometh again but before you file in your returns, look for ways to maximise your tax savings.

THE time for filing tax returns is upon us again and foremost on every taxpayer’s mind now is how to pay the least tax without being penalised – or even imprisoned – for tax avoidance.

So the million-dollar question is how can Malaysian taxpayers pay less tax?

KPMG tax partner Pauline Tam points us to some simple moves.

“Make an effort to be updated with the full list of tax exempt or partially tax exempt allowances or benefits, personal relief, deduction, rebates or tax incentives that we as individual taxpayers are entitled to.

“Start to recap what you spent in 2009 and compile the receipts for purchase of books, magazines, sports equipment, computer and course fees for a degree at Masters or Doctorate level and so forth that you could have chucked away in your drawers.

“If you have somehow forgotten what you spent in 2009, it’s never too late to start planning now for 2010,” she advises.

Peter Lim, a senior manager with a multinational company, has a shoebox full of receipts which he plans to sieve through in the coming weeks to offset against his taxable income.

“I aim to take advantage of all the tax reliefs that I am entitled to. My taxes always result in a big hole in my pocket as I tend to lose my receipts and am not updated on the latest incentives and reliefs.

“Hopefully it will result in lower taxes for me this time especially since the Government did not introduce many new incentives for the year of assessment (Y/A) 2009,” he says.

There are few changes in terms of tax incentives, reliefs and rebates for individual taxpayers for Y/A 2009 versus Y/A 2008.

The main changes consist of the reduction of the top marginal tax rate to 27% from 28%; increase in the rebate given to individual taxpayers whose chargeable income does not exceed RM35,000, to RM400 from RM350; and tax exemption on interest income from Syariah-compliant savings bonds issued by the Government.

The withholding tax rate on non-corporate investors including residents and non-residents for income from real estate investment trusts listed on Bursa Malaysia was reduced to 10% from 15%.

In addition, bonus and directors’ fees are to be taxed in the year such income are received.

Therefore, tips for individual taxpayers to pay less tax would definitely come in handy. (See: Important points to consider and Quick Tips chart)

Employers’ role

KPMG’s Tam says employers might wish to educate their employees on the types of reliefs and tax deductions that they are entitled to, as well as the types of records that employees should maintain to substantiate the claims.

“This would go a long way in assisting employees. The tax awareness programme could involve either inviting Inland Revenue Board (IRB) officials or their tax agents to conduct briefings on a yearly basis or whenever there are tax changes.

“The programme could also include guidance on how to e-file their tax returns and to have a better understanding of their rights and obligations under the tax laws,” she adds.

Employers should also consider the available tax exempt benefits and allowances when reviewing the annual remuneration package for their employees to reduce their financial burden.

However, these would have to be weighed against the additional cost and administrative tasks in implementing the benefits.

PricewaterhouseCoopers Taxation Services Sdn Bhd managing consultant Hilda Liow concurs.

“Malaysian employers are mostly quite receptive to employee tax incentives announced by the Government and do actively consider structuring their employees’ remuneration for tax effectiveness.

“However, the usual constraint is in ensuring that there is no increase of cost to the employer in implementing a tax efficient remuneration structure,” she says.

She stresses that Malaysian employers have to begin to appreciate the overall attractiveness of their employee remuneration and incentives programmes as an important tool for recruiting and retaining talent.

New incentives for Y/A 2010

Incentives that taxpayers should look out for this year are as follows.

Firstly, the top tax rate on chargeable income exceeding RM100,000 is 27% for Y/A 2009, with a reduction to 26% for Y/A 2010.

Secondly, personal relief will be increased from RM8,000 to RM9,000.

In addition, there are new tax reliefs like a tax relief of up to RM500 per year for broadband subscription fees from 2010 until 2012.

The relief for life insurance premiums/approved fund contributions would be increased to RM7,000 from RM6,000.

The additional RM1,000 is given solely to annuity scheme premium from insurance companies contracted with effect from Jan 1, 2010.

The Budget 2010 announcement also saw the unprecedented introduction of a flat reduced tax rate incentive on the employment income of a knowledge worker in a specified economic region (the knowledge worker, qualified activity and specified region must be approved by the Finance Minister).

“The employment income of a Malaysian and foreign knowledge worker residing in Iskandar Malaysia and working in qualifying activities will be taxed at a flat rate of 15%,” Liow explains.

“This incentive applies to knowledge workers applying for and commencing employment in Iskandar Malaysia between Oct 24, 2009 and Dec 31, 2015.”

However, the IRB has yet to issue guidelines on the definition of “knowledge workers” and neither has it provided clear guidelines as to the application process and the documentation to support the application with the Finance Ministry.

To sustain a progressive nation, Liow says the Government would need to enhance the competitiveness of individual taxes.

“There is still the 1% gap between the top personal tax rate of 26% (effective from Y/A 2010) and the corporate tax rate of 25% (effective from Y/A 2009).

“An eventual harmonisation of the top personal and corporate tax rates could provide a competitive advantage in attracting investment and providing greater flexibility for individuals in business to determine their business structure,” she adds.

According to Liow, it is also timely for the Government to expand green tax incentives to the individual consumer especially with the continued focus on green issues and the need for countries to work together to lower their carbon footprint and reduce gas emissions.

Currently, the only incentive enjoyed by an individual is the stamp duty exemption announced in Budget 2010 on the costs incurred to obtain the Green Building Index certificate by the first owner of a residential building.

“More incentives for the individual taxpayer could include residential energy efficient reliefs for energy efficient households, such as the usage of solar heating systems and circulating fans as well as fuel vehicle reliefs for the usage of personal hybrid vehicles,” Liow says.

Tam highlights that widening the income band in each income bracket for the respective progressive tax rates or granting more reliefs or deduction would have a substantial impact in easing the tax burden for individuals.

She reckons the Government could introduce parent relief in recognition of taxpayers supporting their aged and handicapped dependants with further parent relief if the taxpayer lived with the dependant.

“They can also allow taxpayers to claim the full amount of donations given to approved charitable organisations without any restriction. Currently, the deduction of donations is limited to 7% of aggregate income,” she says.

In addition, Tam says, the Government could consider reinstating the deduction of interest paid to finance the acquisition of real property as part of the incidental cost to the acquisition price for computing real property gains tax payable.

TAX- THE DAY OF RECKONING

Folks, tax day is around the corner AGAIN!


What does paying tax mean to you? To different people it has different meaning, i.e.

• TAX= FILING (paperwork)

• TAX = EXTORTION

• TAX = WONDERFUL! I GOT TAX TO PAY, MEANS I GOT INCOME!

Do you relate SAVINGS to PAYING TAX?

While we strongly do not advise anyone to AVOID PAYING TAX, we strongly encourage all concerned to LEGALLY REDUCE your TAX.

Are you aware that through proper tax planning (inc. structure of your income, timing, maximizing deductions, etc.), there is significant savings?

So now you know! ONLY 2 things are definite in life – DEATH & TAX

Thank You for the Appreciation

What makes a day's work worthwhile?


A stranger who becomes a client who then becomes a good friend.

Bonus is when they take the extra step to show appreciation for my work.

MILLIONAIRE or MILLION-HAIR?

Refer to the article posted in our blog "I want to be a MILLIONAIRE".

Questions:

1. Committed or Interested?
2. Do you have a game plan (strategy)?
3. What are you willing to give or do to be a MILLIONAIRE?

@ NICKG Advisory Services, we offer you 2 choices - Planning or Entrepreneurship!

Call us for more information.

else, proceed to achieve your MILLION-HAIR

I want to be a MILLIONAIRE

Sunday March 14, 2010, The STAR


Stories by RASHVINJEET S.BEDI and SUMISHA NAIDU

No longer a dream but a possibility, today’s youth aspire to be rich, become a millionaire by the age of 35, and are confident that they can attain their ambition.


WITH role models like Mark Zuckerberg, 26, founder of Facebook and youngest self-made businessman worth more than a billion dollars; and Sergey Brin and Larry Page, founders of Google, it is no wonder that the young think they can hit the jackpot too. The lure of being young and successful is strong – with icons that made their millions barely out of university.


In today’s world of success equals wealth, many see their paper qualification as a mere stepping stone to routes that will bring them an income beyond a simple salary.


To aspire to be a millionaire is no longer an abstract phrase but a very doable achievement. Obviously, 96% of 1,678 youth up to the age of 30 surveyed in the “So You Want to be a Millionaire” poll think so too.


The poll run by Sunday Star with YouthSays and Universiti Tunku Abdul Rahman found that most youth indicated that they aspire to become millionaires.


Rajen Devadason, a Securities Commission-licensed financial planner with MAAKL Mutual Bhd, attributes the rise to the existence of successful role models like Bill Gates in the United States, Richard Branson in Britain and Datuk Seri Tony Fernandes here in Malaysia.


Role models: The success of Google founders Page (left) and Brin has spurred the young to think that they too can hit the jackpot.


“They are all exciting beacons of possibility for a generation looking for ‘heroes’ to emulate,” says Rajen.


“The appalling lack of political calibre we see everywhere, both in Malaysia and internationally, and the flaky behaviour of some entertainers and sports personalities, have caused today’s young people to increasingly choose to look toward business icons as role models. Financial success is, naturally enough, tied to high achievement in that arena,” he adds.


Joel Neoh, the executive-director of YouthSays, is surprised that almost everyone who took the poll aspires to be a milionaire.


“What is interesting is how many would eventually become one. Many won’t be able to achieve the goal,” he opines.


He is not too sure if the term “millionaire” means having RM1mil in cash or collective assets or a combination of both.


“If it’s collective assets, it’s very possible to achieve it today. About 10 to 15 years of savings can amass to that amount (car, house, etc). However, if it is RM1mil cash, this is quite a challenge to do so before the age of 35 if one is a salaried worker. But if one is running a business, then the chances are higher,” he says.

Neoh believes there is a rise in the number of young adults working towards such a goal and attributes it to how materialistic society has become.


“Materialism is a big part of our society. Many of our parents tell us to get a good degree and good job. For many, being successful means being rich,” he says.


CEO of youth agency Summer Sands, Bernard Hor, shares that there is an increasing market for “how to get rich” courses, citing the many wealth academies and programmes available for those who want to learn how to make money.


“Many of those who go for such programmes are college students,” says Hor.


He adds that the multi-level-marketing (MLM) concept has the most active penetration in the campuses. He claims that research indicates that at least nine out of 10 students are exposed to what MLM has to offer. Hor says that six or seven students join MLM in one way or another.


“They have been sold the idea of making their millions through such marketing,” says Hor, adding that many of them aim to reach their goal before turning 30.

In fact, almost 75% of respondents agreed that being a millionaire was the single-most important thing in their life.


So what is the motivation for becoming a millionaire?


For ATCEN Founder and Group CEO Ernie Chen, being a millionaire is just sexy.


“Why wouldn’t you want to be one? Every kid I’ve met wants to have the cars and houses. They get the idea from TV shows and movies – pop culture, basically. The founders of Google were only in their 20s when they became not just millionaires, but billionaires,” says Chen who runs the Millionaire Business School.


But it is more than just being rich for glamour’s sake; saving for retirement is an important consideration too, especially with the increasing cost of living and inflation.

Loo Chuan Boon, Youth for Change (Y4C) convener, believes that the word millionaire is just a metaphor for making more money.


“There is an assumption that the price of everything will go up and there is a need to make a lot of money to survive, ” he says, adding that many youth are starting to invest in unit trust and other funds.


Alvin Chia, 21, a third-year business student, aspires to be a millionaire by 30. He cites lifestyle needs as a reason to make his millions.


Neoh: ‘Materialism is a big part of our society’.


“We know that in order to maintain the lifestyles we’re accustomed to, we need more than just a basic job to get that million ringgit. My priority in terms of a career right now would be a first job that would broaden my horizons. I’m going to try to earn as much money as I can once I’m done with studying,” he says.


Rajen says that most Malaysians now in their 30s and 40s who hope to retire between the ages of 55 and 65 are likely to need between RM500,000 and RM5 mil, depending on their lifestyles.


“The snowballing effects of inflation will almost certainly kick in well before we retire, thus necessitating millionaire status simply to afford simple amenities in the 2040 to 2050 time period,” he says.


He believes the growing ambitions of today’s youth are also indicative of higher expectations they are willing to place on themselves.


“All this suggests that more young people are willing to pay the high price, in terms of discipline, diligence and courage, to break the bounds of conventional employment and build businesses or professional practices that will grant them their lofty desired economic outcomes,” he adds.


But while almost everyone wants to become a millionaire, not everyone will succeed in doing so.


“I’ve met young people who have huge aspirations. The reality is that some will make it, some will not. If everyone does well, the economy will get better, our country will do better,” says Chen.


Hor: ‘Increasing market for courses on how to get rich’


He travels all over the country looking to recruit students for his “millionaire school”. He thinks that students are very lost because of the numerous options before them.


Spoilt for choice


“We didn’t have very many choices growing up. Now you can be anything you want. There are a lot of ‘professional dreamers’, as I like to call them, out there but they don’t take any serious action towards realising their dreams,” says Chen.


He adds that becoming a millionaire, billionaire, or achieving financial success involves a lot of hard work. And therein lies the problem.


Only 36% of those surveyed believe that hard work is essential to reaching their goal. However, 47% believe that becoming a millionaire is based on opportunities – being at the right place at the right time.


“Young people don’t understand what hard work is,” says Chen.


Similarly, Rajen believes that most youth who talk about setting such high economic goals are unlikely to follow through with the appropriate actions.


But for those who do, they are the top performers in professions like law, medicine, engineering, accountancy and financial planning; players in the oil and gas sector; successful sales professionals of financial products, including life insurance and unit trusts; and persistent entrepreneurs who are willing to face the 1-in-10 chance of having a new business succeed.


Working for someone is viewed as unlikely to help you reach your goal and this is probably the reason why almost 60% of the respondents ticked owning their own businesses and entrepreneurship as the way to achieve their target.


“The heavy emphasis on business and entrepreneurship is correct. That is the way to wealth, at least in terms of earning big bucks,” opines Rajen.


He adds that the entrepreneurs are the ones who have already learnt to be respectful and considerate employees.


“Working initially as a conventional employee for at least three years is, in my opinion, a vital step in the maturation process of becoming a great employer or business owner,” he says.


Neoh says the entrepreneurial route has been proven to work. Their yearly National Youth Entrepreneur Conference has resulted in a few successful startups.


“The Government and businesses have realised this, and are coming up with special with grants and funds for young people to start a business,” he says.


Hor believes the entrepreneurial route requires a lot of patience. He lists his own experience as painful. Many entrepreneurs who have made it big talk about the time when they had only roti canai or Maggi Mee to eat for a long time. He himself had to contend with red beans and bread for almost 10 months.


The need to support one’s family can be a big obstacle in venturing out and taking risks.


“Many want to be bosses and own their own businesses, but after university, they have to send money home. Entrepreneurs don’t get a salary for nine to 18 months. They have no choice but to opt out of the dream and take up a regular job,” says Hor.


Chen, however, says that there are many ways of achieving financial success. “You can be a millionaire even if you are an employee. The key is having businesses on the side and investments,” he says.

Are your EPF savings alone Enough?

Saturday March 13, 2010 (The Star)


Invest ahead to generate extra money after retirement.

WHEN I was growing up, I aspired to join the Government. The main reason so was that I could be eligible for a pension scheme. This came from the fact that my parents were both civil servants and they got to enjoy the benefits of a pension when they retired. They still do.

While it’s not much, it’s comforting for them that at their age, they would continue to have an income for as long as they lived. I wanted to be able to look forward to that as well.

Alas, fate – or was it free will? – had a hand to play in my career choice and I ended up taking a job in the private sector. Seeing as I’m having fun doing what I do, I don’t see myself switching careers any time soon. So there goes my plan of getting a pension.

Time to switch to Plan B, namely, the Employees Provident Fund (EPF). It is intended to help employees from both private and non-pensionable public sectors save a fraction of their salaries in a contribution scheme. The contributions are invested to generate income and the funds in the contributors’ accounts are to be used in the event that the employee is temporarily or no longer fit to work.

It primarily applies to retirement, but sickness, disabilities or unemployment are also covered. The EPF also provides a framework for employers to meet their obligations to employees.

As a retirement plan, money accumulated in EPF savings can only be withdrawn when members turn 50, during which they may withdraw only 30% of their balance. Members who are 55 or older may withdraw the entire sum.

Recently, the EPF board declared a dividend of 5.65% for the financial year ended Dec 31, 2009, up 115 basis points over the 4.5% paid for 2008.

According to Fundsupermart.com Malaysia, over the past five years, EPF has been distributing an average annual dividend of 5%. The average real dividend rate for the past five years was 1.7%, after reflecting an average inflation rate of 3.4%.

With that, the important question to ask is: Will the savings from our EPF be enough to sustain us in our retirement years?

Expert advice

In his Personal Investing column, “Enough money for retirement?” last year, MRR Consulting investment adviser and managing partner Ooi Kok Hwa says as the average Malaysian lived to about 75, those who retire at 55 would need to manage their EPF savings for 20 years. But most retirees spend all their EPF money within three years of retirement, he claims.

Ooi provides a breakdown of how a retiree can manage his EPF savings for 20 years.

“We will assume a starting pay of RM1,500, growing at the rate of 8% per annum; an average bonus of two months per annum, average EPF returns of 5%, total EPF contribution of 23% (employer: 12%, employee: 11%) and inflation rate of 3%.

“Our analysis shows that if we are able to live with just one-third (or 33%) of our last drawn salary, the EPF money should be able to support us for 20 years until we pass away at 75.”

According to Ooi, if a person’s last drawn salary is RM13,976 at 55, he can only afford to spend one-third or RM4,612 per month after retirement (1/3 x RM13,976).

He stresses, however, that the computation was based on the assumption that a person would still be able to generate 5% returns after retirement.

“Everyone has different financial situations. If possible, we need to build our own investment portfolio apart from the EPF savings. We may need to seek some part-time jobs after retirement if our financial resources do not permit us to stop working,” he wrote.

“Besides, we need to clear all our outstanding debts before retirement. We also need to buy enough life and medical insurance for ourselves as well as set up education funds for our children.”

Financial planner Wilson Low says a person who’s concerned about his or her future financial well-being has one clear option – invest.

“Anyone who’s worried about not having enough money in their old age should do something about it, to make sure that you do have money to sustain you when you’re old and not working any more,” he adds.

“The obvious thing to do is to invest in something that can help generate an income for you when you’re older. There are various investment avenues out there and with proper planning and research, financial independence is not an impossibility.”

What some have done

Rita (not her real name), is a retired nurse. After working for the Government for 30 years, she worked in the private sector for a further nine years because she needed the money.

However, she admits that without her pension, it would be difficult to make ends meet. “There are things like your children’s education or repairs to the house that you need to think about. Without the pension, the EPF definitely would not be enough.”

Rita adds that as a former civil servant, she will always be eligible for free treatment at government hospitals. “This is especially important since most medical expenses will come up as one gets older,” she says.

Rita adds that EPF also used to declare higher dividends, between 6% and 7% in the 1990s.

Kamala (not her real name) was a former employee of the Rubber Research Institute of Malaysia. A Government-based organisation initially, it was privatised in the 1990s and its employees were asked to chose either a pension or EPF scheme as a retirement option.

Kamala chose the EPF scheme, a decision she claims she regrets. “The money finished quickly as I had many financial obligations like my children’s education and housing loan. I also had to undergo an expensive operation, the cost of which would not have been an issue if I were a civil servant.”

She is however thankful that today, her children have all grown up and give her husband and her money on a monthly basis. “We have also invested our money in property. So financially we are all right.”

Meanwhile, Kong, an information technology executive in his early 40s, says he spends about RM4,000 a month on household expenses, his children’s education and an outstanding home and car loan, among other financial obligations.

“I’m spending so much every month that I hardly have enough to save. Fortunately my wife is also contributing. After 55, it’s definitely not going to be easy. I’ll probably have to continue working until my kids can support themselves,” he adds.

Send Us Your Feedback

Friends, thank you very much for your interest and support. We're constantly looking to improve and meet your needs.


Please do not hesitate to give us your feedback, especially what contents would you like to see in our facebook/blog/web.

Your feedback is valuable to us!

Cheers

Integrated Planning

Most of you if not all of you do some form of planning.


Question is - How closely related are they to your goals/concerns? Are they worthy in terms of the $$$ you put in?

Just the other day, in the course of a conversation, a businessman highlighted his plight. The plight was his plans are very disconnected. A little here, a little there and some without any purpose. Worse, he may be spending unnecessary money.

It has again reinforced our beliief in NICKG Advisory Services that "Integrated Planning" is essential to all. Our Integrated Planning ensures you do not waste your previous $$$ resources and every plan that you implement is optimized.

Life is an Exchange

"There is a difference between interest and commitment. When you are interested in doing something, you do it only when it is convenient. When you are committed, you accept no excuses." (Kenneth Blanchard)

What about your finances? Are you interested or committed to your financial freedom?

Life is an Exchange.

What would you give in exchange for real financial freedom?

DO YOU KNOW WHO YOU ARE?

Always, there are 3 types of people...

• Those who MAKE things happen
• Those who WATCH things happen
• Those who DON'T KNOW things happen

Maybe, a 4th / 5th type?

• Those who DON'T CARE things happen
• Or, Those who NEED THINGS TO HAPPEN TO THEM.

Hint!
NICKG Advisory Services is here and passionate to help "Those who MAKE things happen"

Full Time Job

RETIREMENT is a FULL TIME JOB and you are the BOSS.

Can you afford to pay yourself?

Stocks - Gate to Hell?

Have you ever heard the comment - DO NOT TOUCH STOCKS ELSE RISK BEING BURNT!

Ooohh...does that not sound scary? Well fortunately I do not subscribe to that belief. From experience and my professional know-how, those words are spoken by people who does not have the vocabulary "Risk Management".

What is Risk Management? How do we implement risk management?

Drop us a line and we will be happy to share with you...

Till then, remember - Stocks are not DANGEROUS!