Today's luxury Compensates Tomorrow's Quality

Our Government has recently come up with a New Policy that seemed to lightened up most of the citizens by declaring that people who are contributing to EPF can choose to cut 3% of the contribution from monthly paycheck, up to 2 years time.

It was deemed as a piece of good news by most people because we could have more 'cash' by taking this 3% decrement in our EPF saving. This is exactly what the government is intended to do. By giving more ‘Cash’ to us, so that the demon of spending the money which is residing in everyone of us can finally get the better of us. When we have more cash in hand, we tend to spend more, and by doing this we stimulate the economy growth. So this is the intention behind the government rational for implementing this policy.

But to some people who have opted to stick to the 11% contribution to EPF instead of taking the 3% decrement, it doesnt mean they have enough cash in hand though. They simply see the huge complication this 3% cut would bring about in the future. By saving lesser into the retirement account, we are actually taking out our retirement fund and use it for today's luxury, risking the quality of our retirement lifestyle for today comforts.

Take for example, a person who's making RM 5000 for a living monthly would have extra RM 90 per month by taking the 3% off EPF saving. So for the effective time period of 2 years under this policy, RM 90 x 24 months = RM 2160.

However, if this RM 90 is injected into EPF like normally would, under the projected 5% interest rate offered by EPF, in 2 years time there will be RM2160 as well. However, as this RM2160 would be inside this account and enjoy a 5% interest rate, let say for 20 year time horizon when this person reach retirement age, this RM2160 would become around RM 5200, we are looking at a 100% increment from the RM2160. If this person draws salary RM 10000 monthly, it would become RM 9600++(take RM300 n spend it today, or prefer to have RM 9600 when retire)

Havent this illustrates that if we decide to spend more today by using the money saved for retirement purpose, we actually compensated the quality of our retirement lifestlye?