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Thursday, May 28, 2015

Invest in PRS As Low As RM100!

Private Retirement Scheme (PRS) is no longer a new thing in Malaysia, yet not many people realized the importance of it. Literally, as the name would suggest, the objective of PRS is to invest for your future retirement needs. With or without contribution to Employee Provident Fund (EPF), PRS is another important vehicle for you to save up for retirement.  

Invest in PRS as Low as RM100
Source from PRS Youth Incentive
Why do I need PRS when I have Contributed to EPF?
For those employees that contributing to EPF, technically, PRS is just another added option to save up for retirement. You might want to invest into PRS if you do not have the discipline to invest regularly. But bottom line, you should at least invest RM3,000 annually into PRS. This is simply because Lembaga Hasil Dalam Negeri (LHDN) allows a maximum of RM3,000 tax relief with effect from year assessment 2012 to 2021. It is definitely a good way for you to maximize tax saving

How Much is the Minimum to Start?
The initial amount to start investing in PRS is varied depending on the fund but it could be as low as RM100. But as #yourfinancedoctor the amount should always be matched with your purpose of investment. Like I have always mentioned, always begins with the end in mind! You gotta know where is your destination and how long it takes to reach first before deciding which route to take. 

What's the Wise Options for Me?
For employees that is not liable to tax:
Probably you have just started to work and your annual income is not high enough yet. Well, if you have the habit to invest or discipline to save, then this might not be the best vehicle for you. So just forget about it!

For employees that is liable to tax:
For starter, find out how much you need in order to get a full refund of your monthly tax deduction (MTD). Otherwise, don't bother to count and just make it at RM3,000 annually. In this case, you could also invest RM250 monthly thru Direct Debit Instruction (DDI) if you do not want to take a lump sum out. Meaning to say that monthly auto deduct RM250 from your bank to invest into PRS and maximize tax saving thru the tax relief of RM3,000. #nosweat #hasslefree

For self-employed without EPF:
PRS pretty much acts the same as EPF to you, whereby you are restricted from withdrawal until retirement (Account 2 (30%) could be withdrawn but subjected to 8% tax penalty). Thru PRS, you got the freedom to choose and even switch funds that you would like to invest, unlike EPF, where you don't get a say on how your money is being invested. So it is a good investment for retirement too!

Why Should I Start Now?
Yes, you should start now especially if you are below 30! Yes, I'm talking about the PRS Youth Incentive! Within the period from 2014-2018, government will pay a once-off RM500 into your PRS account once you accumulated RM1000 within a year! That's an immediate return of around 50%! GOOD DEAL that you can't find elsewhere!

What Fund Should I Buy?
A very common question that most of the people would like to ask. But again, as #yourfinancedoctor , just like health, it varies from one to another individual. Some sick people might need higher dosage of medicine, while some might just need mild dosage of medicine. I gotta know your illness first before treating you! So feel free to click here to get your number and wait for your turn. =p

Source from PRS Youth Incentive
Conclusions:
If you are a finance savvy person like #yourfinancedoctor (erhem erhem XD), perhaps RM3,000 per annual is the maximum you should put whereby you have maximize the tax relief. Well, there's no point locking your investment into a vehicle that you could not touch until 20 or 30 years later right? But bear in mind, it is provided that you have the discipline and habit to save and invest yourself, then the big world out there with full of better opportunities is waiting for you!


To find out more about it, feel free to contact me at henrytcx@gmail.com


Earn, Save, Invest, Repeat!
Till then. Happy Investing! ;)

13 comments:

  1. Replies
    1. Thanks! You should kick start yours too! ;)

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  2. Surprised that you can invest even such small amounts

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    Replies
    1. Yup! Many would thought that you gotta have a lot of money to start investing! that's a myth!

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  3. It would be great if you could include a schedule visual for an investment of RM3,000 per year, how much you would have saved plus returns in say, 20 years for both employees that is liable to tax and for the self employed. People always want to see how much they get in the end (taking away variables like inflation, salary increase etc)

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    Replies
    1. THanks Hanniz for the advice! Would do so in the next PRS post!

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  4. Great info! Thanks for sharing!

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  5. ah i guess i'm too late since i'm already over 30. *cries a bucket*

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  6. I've always been interested in this. But I can't understand the jargons and stuff on the actual site, though it might just be me being a finance illiterate me. The article was really helpful though. It would help if you could put out a chart or something that explains how much investors stand to gain from this investment.

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  7. Wow, to be honest, this is actually the first time I have ever heard of PRS. This article indeed is an eye opener, and actually a good start of wanting to save for the future. :)

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  8. A lot of facts. haha. I think I'm pretty young at the moment. But this helped me a lot on how to manage my financial spendings/ savings. Never really heard of PRS before but its good to know from your post.

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  9. Thank you for sharing such great information.It is informative,can you help me in finding out more detail onClaim Settlement Ratio,i am interested and would like to know more about this field and wanted to understand the basics of Term Insurance Policy

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