How to accumulate enough money for retirement

Wealth for retirement, How to earn 30-year investment returns with different savings amounts and rates

ON Jan 28, we have written an article on We all need to become millionaires. That article explained that we need to have cash reserves of about RM1mil to be able to maintain our current lifestyle 20 years after retirement.

Some readers responded and would like to know more on how to accumulate enough money for their retirement.

In this article, we will look into 30-year investment returns with different savings amounts and rate of returns. Our computation is based on the assumption that we start investing at the age of 25 and intend to retire at 55.

·Based on how much rate of returns you can achieve

The table shows that if we save RM100 per month and invest the money into fixed deposits (FD), assuming the FD can provide about 3% return over the next 30 years, our investment portfolio will reach RM58,274 when we reach 55.

However, if we can generate 5%, 7% and 10% returns, our investment portfolio will achieve RM83,226, RM121,997 and RM226,049 respectively.

The EPF may be able to provide us about 5% whereas unit trust investments may be able to give us 7% to 10% returns over a very long-term period.

Assuming that we treat the 3% FD return as our risk-free rate, any extra returns above this rate will be the risk premium for the additional risk that we are prepared to face.

Therefore, we need to understand our risk tolerance level before considering any type of risky investment.

We should ask ourselves whether we are willing to accept the uncertainty of return that is inherent in those investments.

Besides, we need to understand whether we can afford to have our savings tied up for a long period before we can achieve our investment targets.

·Based on how much you save and not how much you earn

We agree that when you earn more money, you should have more money for your investments. Unfortunately, some investors are unable to save even though they earn high salaries.

From the table, we can see that if we are able to save RM500 per month in FD, assuming a 3% return per annum, our investment portfolio will reach RM291,368 when we retire at age 55, five times higher than the savings of RM100 per month.

Hence, if we can cut down on our expenses and live below our means, we should have more money to save.

We should always ask ourselves whether we want to spend money on unnecessary luxury items to keep up with the Jones or be more frugal and spend less to achieve financial freedom earlier.

The question on how to generate high returns is frequently asked by readers. Unfortunately, there is no straight-forward answer to this.

We can equip ourselves with strong financial and investing knowledge which helps us in making better investment decision that will eventually translate into better returns.

To do so, we need to be interested in the economic and business activities around us.

For those who are beginning to learn about investing, you can go to any bookstore to look for investment books that you can comprehend to build up the foundation.

Remember that there is no point in buying books written by top investment gurus in the world if you cannot understand what it is trying to tell.

Once you have built up your knowledge, you should be able to digest the financial information and do your own research in investment.

Source: TheStar

PNB Offers 3.33 Bil ASM Units, 2 Bil ASW 2020 Units

Permodalan Nasional Bhd (PNB), the country's biggest fund manager managing RM76 billion worth of funds, will offer 3.33 billion new units of Amanah Saham Malaysia (ASM) and two billion Amanah Saham Wawasan 2020 (ASW 2020) units, Prime Minister Datuk Seri Najib Tun Razak announced on Monday.

He said the units would be sold from tomorrow at all the 1,500 agents and Amanah Saham Nasional Bhd offices country-wide while the ASW 2020 units can bought from April 27.

Each investor can buy a maximum of 20,000 units in the two schemes.

The announcement on the new unit trusts offer, which would enable more Malaysians to participate in the capital market, was made by the prime minister when launching the 2009 Malaysian Unit Trust Week here.

The unit trust week, an annual event, is to boost awareness and understanding on investment and importance of planning one's finances.

Najib said the unit trust week hosted consistently every year over the past 10 years had yielded positive results in educating the people on the importance of savings and investment.

"If during the Asian financial crisis in 1997-98 saw investors withdrawing close to RM1 billion from unit trust schemes run by PNB like ASB, the situation is much better now," said Najib, who is also Finance Minister.

The prime minister said last year PNB enjoyed more than RM10 billion in net inflow into funds it was managing.

"I'm very happy PNB has succeeded in pooling more than RM87 billion from more than 9.3 million investors," he said.

Najib said the net inflow of PNB unit trusts was RM5 billion so far this year.

He said the dividend distributed to investors has exceeded RM65 billion, thus contributing to improve the socio-economic well-being of the people.

"This means PNB's unit trust funds have educated the people to be more efficient and prudent in managing their finances," he said.

Najib said the introduction of ASN and other unit trust schemes through PNB had changed the people's paradigm on investing in unit trusts to an unexpected level.

"Before ASN was introduced, Malaysians, especially Bumiputeras, were very alien to the investment world," he said

The prime minister said the unit trust industry became synonym with the people through PNB's continuous aggressive efforts until now besides efficient implementation of investment educational programmes.

"In fact, it is not too much if I say the PNB unit trusts have succeeded in developing a own brand in the country's unit trust industry by galvanising solid support from Bumiputeras and non-Bumiputeras," he added.

Source: Bernama

CIMB launches China fund, targets RM150m

CIMB-Principal Asset Management Sdn Bhd is targeting RM150million investments from customers for its CIMB-Principal China Recovery Structured Fund on improved economic climate in the third-largest economy in the world, said its chief executive J. Campbell Tupling.
"The stimulus plan by Chinese government has seen change in sentiments. Positive developments are visible in major sectors -- infrastructure, housing, innovation, health and education-- that would enable China to chart high growth potential," Tupling said at the launch of the fund on April 20.

The five-year close-ended fund has an approved fund size of 300 million units with an initial offer price of 50 sen per unit. Minimum investment for the fund is RM10,000. The fund, based on the CIMB-Isovol China Index, could see potential gains of 7%.

Tupling also said the fund would appeal to low risk investors as the fund offered capital protection if held to maturity.

It would also reduce investor's dilemma in terms of entry to the Chinese market as the fund would automatically select and lock-in investments at lowest entry level to enhance potential gains after a six-month observation.

The firm's chief investment officer Raymond Tang estimates China's GDP growth at 7.6% this year on stimulus spending by the Chinese government.

"Investors can expect better outlook for China this year as consensus view is the nation will be one of first economies to recover," Tupling said.

Source: TheEdge Malaysia

Frequently Asked Questions of Sukuk Simpanan Rakyat (SSR) 01/2009

The following information is to help you understand better the features of SSR 01/2009:

1. Who is eligible for the SSR 01/2009?
Malaysian citizens who are 21 years old and above

2. When is the offer period for the SSR 01/2009?
The SSR 01/2009 is offered to the public from 14 April to 13 May 2009.

3. When is the SSR 01/2009 application form made available to the public?
The SSR 01/2009 application form will be made available to the public before the sales period at branches of the agent banks, and can be downloaded from www.treasury.gov.my and www.bnm.gov.my/sukuksimpanan.

4. Can agent bank accept application and payment for SSR 01/2009 from the public before the sales period?
No. Agent banks can only accept application and payment for SSR 01/2009 from the public during the sales period commencing from 14 April 2009.

5. What is the basis of the allocation of the SSR 01/2009?
The allocation of SSR 01/2009 to the applicant is based on a first-come first-served basis and is subject to such terms and conditions specified. The payment for the application of the SSR 01/2009 during the sales period does not imply that the applicant would be successful in the allocation of the SSR 01/2009.

6. What is the frequency of issuance for the SSR in 2009?
There will be two issuances of the SSR in 2009.

7. What is the tenure of the SSR 01/2009?
The SSR 01/2009 will have a maturity of three years.

8. What will the minimum and maximum amount of subscription be?
The minimum amount of holding per SSR 01/2009 holder is RM1,000 per application and in multiples of RM100, e.g. RM1,100, RM1,200, etc. The maximum aggregate holding per SSR 2009 holder for the two series is RM50,000.

9. Why is the maximum holding per SSR 2009 holder fixed at RM50,000 only?
The maximum holding of RM50,000 per SSR 2009 holder is to allow a wider distribution of the SSR 2009, so that more citizens can benefit from it.

10. Would profit be paid on the applicant’s investment from the date of application to the date of issuance of SSR 01/2009?
* For SSR 01/2009 holder who chooses to open or maintain a savings account with agent bank for the purpose of receiving quarterly profit payment, early redemption and final redemption:
o The agent banks will pay the SSR 01/2009 holder the prevailing savings account rate for the period between the date of application and the date of issuance of SSR 01/2009.
o For example, if you apply for the SSR 01/2009 on 14 April 2009, you will receive the savings account rate from 14 April to 13 May 2009.
* If however, for SSR 01/2009 holder who chooses to open or maintain a current account with agent bank for the purpose of receiving quarterly profit payment, early redemption and final redemption, the SSR 01/2009 holder will not be receiving any profit for the period between the date of application and the date of issuance of SSR 01/2009.


11. What is the profit for the SSR 01/2009?
The profit for the SSR 01/2009 is 5% per annum. This means the profit is approximately 1.25% (5% divided by 4) of the holding amount at the end of each quarter.

12. When and how will profit be paid to the SSR 01/2009 holder?
Profit will be paid on a quarterly basis. The profit from the SSR 01/2009 will be credited directly into the SSR 01/2009 holder’s savings or current account maintained with the agent banks.

13. Will the returns on SSR 01/2009 be subject to tax?
No, returns on the SSR 01/2009 are exempted from tax.

14. Can the SSR 01/2009 holder exercise early and partial redemption of the SSR 01/2009?
* The SSR 01/2009 can be redeemed early at the nominal value and including the profit amount due before the maturity date but after the first profit payment. The profit payment will be apportioned based on the number of days the SSR 01/2009 is held. Minimum redemption amount allowed is RM100.
* SSR 01/2009 holder may redeem the SSR 01/2009 in multiples of RM100.


15. When and how can SSR 01/2009 holder redeem the SSR 01/2009 at maturity?
Redemption proceeds (including the last profit payment) will automatically be paid by crediting directly into the SSR 01/2009 holder's account maintained with the agent bank at maturity.

16. Is the SSR 01/2009 transferable?
The SSR 01/2009 is non-negotiable, non-transferable and non-assignable. In the event of the demise of the SSR 01/2009 holder, the SSR 01/2009 held by the deceased SSR 01/2009 holder shall form part of his estate.

17. What documentation is required when applying for subscription of the SSR 01/2009?
An original or a certified copy of the Identity Card (I.C.).

18. Where can the SSR 01/2009 be subscribed?
The SSR 01/2009 can be subscribed at all agent banks, i.e. commercial banks, including Islamic banks, Bank Kerjasama Rakyat Malaysia Berhad, Bank Simpanan Nasional and Bank Pertanian Malaysia Berhad.

The application form for Sukuk Simpanan Rakyat is available here.