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Sunday, April 12, 2015

LHDN Income Tax Rate 2014 Vs Income Tax Rate 2015 (Post-GST Implementation)


As the goods and service tax (GST) is officially implemented in Malaysia 2014, most Malaysians will finally have to pay tax from all income level. Paying more taxes definitely not good news for almost everywhere through out the world, but there is very small good news to the income tax payers, whereas the income tax rate for the year 2015 will be reduced by few points basis.

The winner again, will be the high income earner - which is those who are earning RM400K and above because their rate drop although they might still argue that they will pay a lot more in the form of GST. The following is the comparison of the income tax rate before the GST implementation vs the post-GST.


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Saturday, February 7, 2015

Working longer may not be the solution


If you have not think about saving for retirement, perhaps it's time to put this question into light for a while.

Have you plan your path to retirement?

As life gets in the way, it's normal for most people to think of it as "I'll just work for longer rather than worry too much about saving for retirement now." It's normal and I have friends who started a family at young age...and savings become difficult when one has to meet the monthly bills and forking out money for kids....day care is not getting any cheaper and wait til the kids are going into college. The amount of money required is unbelievable but that's another story though.

But the question is this: Is working longer really the solution?

Well, none of us can be certain...some work, some doesn't but statistic don't lie.

WORKING LONGER MAY NOT ALWAYS BE POSSIBLE

The baby boomers have been trying the work-longer experiment and it often doesn't  work for them. Studies have been done in the States and found that overall, more than one-half of workers (53%) reported that they planned to work longer than they would like in order to continue receiving health insurance through work. Only 19% of retirees actually were able to do that, primarily because of unexpected health issues or the need to take care of a family member. 

Of course, statistics also shown that if an individual could work longer, say til 60 instead of 55 would increase the number of baby boomers preparation to fund retirement from 38% to 69%, that's almost double up the likelihood. But people who are older will find it difficult to be rehired if they lose a job, partly due to the physical demands and intense competition. 

Source: Statistics Canada and BC Stats

People aren't in complete control of how long they will be able to keep working, even if they want to do so.

It's time to look at the other alternative:

Saving for retirement now 

Essentially you are rolling the dice if you think that working longer will be your answer to not saving for retirement now. The sooner you start, the less you will actually need to save. It's not magic or rocket science....it's just the value of compounding.

It's almost difficult to see the value of compounding and until you see it, it's always almost too late to start. 

Essentially what compounding does is let you earn more money from funds you've already invested. For example if you invest $100 on Jan. 1 and earn 6% on that money in a mutual fund that invests in stocks and bonds, you will have $106 at the end of the year. The next year you will start with $106 and earn an additional $6.36, slightly more because you have both the initial $100 plus $6 in interest upon which to earn more money.

Assuming you earn @ 6% annually:

value of compounding

Take a simple scenario, if you are saving $10 a week and you started from age 20 to 62, and let's say you are earning on average 6% annually, by the time you retire, you have about $103,354. If you are saving $20 a week, you would have about $206,708. Not bad for a $10 or $20 weekly savings for that matter. 

If you happen to be using a mutual fund which is a bit more risk at 8% annually:

With the same amount of saving of $10 a week, you would have about $185,093 or with $20 a week, you would reach about $370,187 by the time you're 62 assuming you start at the age of 20.

Savings compounding @ 8% annually

Well, not bad for an investment of $10 or $20 a week. Well, the point is, the value of compounding is greater that we know or we think we know. 

If you are saving at $10 a week, you have only been paying approximately of $22,360 by the time you reach the age of 62. So, maybe the next time before you splash your cash on another iPhone, maybe you would have already save the $10 a week that you said you couldn't.

CONCLUSION:

The conclusion is simple: Don't wait to save for your retirement. The earlier you start, the better and less painful the process will be – and the more money you'll end up having. In order to meet your retirement goals, you might have to adjust along the way, increasing more for your retirement savings whenever you see a raise in your pay etc. For example, when you get a 3% increase, put a third of it into the pot. You can still enjoy much of the raise, but you can also help your future.

We definitely know there are other ways to earn more and faster for retirement...some people are speculating on stocks while others on properties...we have nothing against that but setting aside a certain portion of money for retirement savings definitely will not do you much harm. $10/week...is it really that tough? If not, how about $20? 






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