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This Week at a Glance…

i) EPF: RM1 million to retire in 20-30 years.

The retirement fund stated that this amount is the “bare minimum” after factoring in inflation and medical bills. But how much will RM1 million be worth in the next 2-3 decades?

ii) Foreign investors net sold RM613 million of local equities for the week ending 20 October.

According to MIDF’s weekly fund flow report, they have offloaded RM3.73 billion on a year-to-date basis.

iii) How are ASB/ASM dividends calculated?

The returns from both unit trust funds are calculated based on the lowest balance in your account every month.

Scroll down to read the details.

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Grow your savings easily in these 5 places.

In case you missed it, I wrote an article recently about the best places to store and grow your savings. These include:

• Touch n’ GO+ (3.41% pa)

• Versa Cash-i (Promo Rate: 4.30% pa)

• Rize (Promo Rate: 5.00% pa)

• ASB & ASM (4-6% pa)

• Fixed Deposits (3.80-4.20% pa)

Read the full article with detailed comparisons here.

RM1 million required to retire in the next 20-30 years.

According to EPF chief strategy officer Nurhisham Hussein, citizens will need at least RM1 million to retire in 20-30 years.

This would be the “bare minimum” after factoring inflation, medical bills, and other necessary spending, he said.

To clarify, EPF has 3 savings goals:

• RM240,000: The minimum basic savings target, revised upwards in 2019. Translates into a monthly income of RM1,000 for the next 20 years.

• RM600,000: Recommended amount for those who are retiring today or in the next 5 years. Translates into a monthly income of RM2,500 for 20 years.

• RM1 million: For those who are planning to retire in 20-30 years. Assuming that EPF pays 5% pa, you’ll receive RM50,000 in dividends every year, or RM4,166 per month.

But how much will RM1 million be worth in the future?

Let’s take a look at Malaysia’s overall inflation in the past 2 decades.

It ranged from a low of -1.14% to a high of 5.43%, averaging 2.15% since 2002.

Using this average and projecting it forward 25 years, RM1 million is equivalent to RM587,544 in today’s money.

In other words, the monthly dividend of RM4,166 will be worth 41% less, at RM2,447.70 today.

That’s pretty accurate if we look into the Belanjawanku Study, which estimates that retirees require RM2,520 per month to survive in the Klang Valley right now.

How do I know if I am on track to achieve RM1 million?

Here is a table based on the average EPF savings of members in each age group.

The calculations include mandatory contributions from you and your employer. So, to hit RM1 mil by 55, you would only need to top up the difference.

Use the compound interest calculator to simulate different scenarios.

MIDF: Foreign selling of equities surged to RM613 million last week.

The Malaysian market saw heavy outflow from foreign investors for the week ending 20 October, with them offloading RM613.0 million after briefly net buying RM10.2 million the week prior.

In its weekly fund flow report, MIDF stated that sectors with the highest amount of net outflows were Financial Services (-RM337.1m), Consumer Products & Services (-RM100.6m) and Telecommunications & Media (-RM51.4m).

“Year-to-date, foreign investors have net sold RM3.73 billion on Bursa Malaysia,” it said.

The top three stocks with weekly net outflows from foreign investors were Hong Leong Bank (RM119.6 million), CIMB (RM99.9 million), and RHB Bank (RM57.4 million).

However, the same three counters were heavily acquired by local institutions, which suggests that both parties were exchanging hands for the week.

A similar pattern is observed for foreign net buying and local net selling.

How are ASB/ASM dividends calculated?

ASB/ASM dividends are calculated every month based on the lowest balance in your account.

The profits will automatically be re-invested as additional units when the funds declare dividends once a year.

Since the calculation is done every 30 days, it doesn’t really matter when you invest during the month.

Scenario 1:

You start the year with RM50,000 and invest RM100 every month in ASB.

The dividend for January is based on RM50,000 (lowest balance).

The dividend for February is based on RM50,100, and so on.

To calculate your returns, add up the minimum monthly balance in your account and multiply it with the income distribution and bonuses.

In this case, the total minimum monthly balance is 606,600 units, and the dividend (based on 2022 returns) was RM2,475.31.

Scenario 2:

You start with RM22,300 in January but redeemed RM300 every month through 2022.

Your total monthly minimum balance will be 244,200 units, and the total dividend will be RM1,037.86.

To read more about ASB/ASM and what assets these funds invest in, click here.

That’s all for this week’s newsletter!

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.

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