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01 introduction
Respondents’ background
 Respondent 1

Monthly Income Insurance

Life and health
RM4,000
insurance

Millennial
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Investment Loan
EPF • Single Car loan
• Chinese
• 0 dependent
 Respondent 2

Monthly Income Insurance

Life and investment
RM15,000
linked insurance

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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living expenditures after retirement 

Travelling expenses + 10,000.00

H: Equal: Anticipated inflation adjusted expenses = 106,181.01

needed after retirement
 Future value of EPF fund
Respondent 1 Present Value RM60,000
Step 3: Estimate Income at RM Payment 0
Retirement
Interest/Year 8.1%
I. Total fund in EPF in today’s Ringgits  60,000.00 Number of Year 30
Future Value RM620,757.63
J. Plus: Pension benefits in today’s + 0.00
Ringgits
• Although he has made investment in fixed deposit and
K Other passive income in today’s + 0.00 mutual funds, the investments are not solely for retirement
. Ringgits 
purposes, thus is not included in the calculation.
L Equal: Expected retirement income in = 60,000.00
. today’s dollars • The respondent says that he has no passive income or
pension benefits that is expected to receive after retirement.
M Total future retirement income (Refer FV 620,757.63
. to Table 2.1.2) • Referring to the table above, with a present value of
RM60,000, the future value for the EPF will be
N Inflation adjusted annual retirement PM 46,081.81
. income  T RM620,757.63.
(Refer to Table 2.1.3) • Moving on from the calculation of future value for the EPF,
we have calculated the annual income withdrawn from EPF.
• We have adjusted the annual income based on the inflation
rate of 4%, which makes the interest rate used in the
calculation to be 4.1%.
 • Inflation can affect the level of future shortfall and
Respondent 1 erode purchasing power.
Step 4: Calculate the RM
• Thus, we had assumed that the inflation rate over the
Annual Inflation- next 30 years will be 4% annually and adjusted
Adjusted Shortfall
accordingly in Step 2 and Step 3.
O. The after-tax income necessary to cover Line H 106,181.01
the annual living expenses • The inflation adjusted annual expenses is
P. Line N 46,081.81 RM106,181.01 while the inflation adjusted income is
Deduct: Total Estimate income at
retirement   RM46,081.01.
Q. Annual Inflation-Adjusted Shortfall 60,099.20
• Hence, the inflation-adjusted shortfall would come to a
total of RM60,099.20.

• 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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income in the future.

 Respondent 2
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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 • Respondent 2 wants to have a
Step 2: Estimate How Much They Will Need quiet and low harmonious life
RM
A. Present level of living expenditures on a before-tax basis 40,486.20
B. Adjustment for Base retirement expenditure in today's dollars 0.75
C. Equals: Annual living expenditures at retirement in today's (Line A x 30,364.65 • EPF and PRS are non-taxable income
• Investments in Bonds, ASB and Unit
Ringgits on a before-tax basis Line B)
Trust are exempted from being taxed
D. Before-tax adjustment factor / -

E. Equals: The after-tax income necessary to cover the annual = 30,364.65

living expenses in line C PV = RM30,364.65
PMT = 0
F. The inflation adjustment for calculating the future retirement FV 50,559.37
I/Y = 4%
expenses. (Refer to Table 2.2.1) N = 13 years
FV = RM50,559.37
G. Plus or minus: Anticipated increases or decreases in living

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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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Q. Total future retirement income (Refer to Table 2.2.2) FV 966,000.97

R. Inflation adjusted annual retirement income PMT 60,931.74
(Refer to Table 2.2.3 & 2.2.4)
Types of Investment PV ROI FV
FV = PV(1+i) n
Private Retirement Schemes (PRS) 40,000.00 1.52% 48,666.59
Employees Provident Fund (EPF) 11,500.00 8.10% 31,654.24 n = 13 years
Malaysia government bond 50,000.00 4.50% 88,609.80
Amanah Saham Bumiputera (ASB) 200,000.00 4.25% 343,572.84
RHB Retirement Series - Islamic Balanced Fund 200,000.00 6.50% 453,497.50
996,000.97

Types of Investment PV Weight ROI

Weighted average interest rate Private Retirement Schemes (PRS) 40000.00 0.080 1.52% 0.12%

= 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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H. Total Estimate income at retirement 60,931.74

Step 4: Calculate the Annual Inflation-Adjusted Shortfall
RM
S. The after-tax income necessary to cover the annual Line H 65,559.37
living expenses
T. Deduct: Total Estimate income at retirement Line R 60,931.74

U. Annual Inflation-Adjusted Shortfall 4,627.64

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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Currency Risk, Country Risk

 Respondent 2: Private
Retirement Scheme (PRS)
Public Mutual Islamic Moderate Fund (PRS-IMDF)
• Seeks income consistent with capital preservation
• Invest in:
a) Shariah-compliant equity
b) Shariah-compliant equity-related securities
c) Islamic collective investment schemes
d) Sukuk
e) Islamic liquid assets
• Average return in 5-years is 1.52%
• N=13, Payment = RM3,000 Annually (RM250
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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
• •
Insufficient funds to
support financial goal (EPF
alone)
• •
Look for conservative
investments
• Public Mutual PRS Equity
Fund
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• •
Bonds – Malaysian
Government Securities
• Shares – Tenaga Nasional
Respondent 2
Sufficient funds to support
financial goal (EPF, PRS,
ASB, Unit trust, Bond)
Look for moderate
investments to get more
returns to have more adequate
funds to travel
Public Mutual Islamic
Moderate Fund
Bhd
 Thankyou
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