The Managing Director of SAC Wealth Management Sdn. Bhd. explained some differences between Private Retirement Scheme provided by unit trust companies and the Deferred Annuity Plan provided by insurance companies.

Both plans qualify for additional RM3000 tax relief on top of the existing RM6000 EPF + Insurance Premium and RM3000 education and medical insurance premium….(read more)

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Preparing for retirement is an essential aspect of financial planning. It involves setting aside a portion of your income in a retirement savings plan that will provide you with sufficient funds when you retire. There are several options for retirement savings, including private retirement schemes and deferred annuities.

Private retirement schemes, or PRS, are voluntary long-term investment schemes designed to help individuals save for retirement. PRS are managed by licensed fund managers and offer flexibility and diversification in investment options with contributions made through salary deductions or lump sum payments.

On the other hand, deferred annuities are financial products that provide a guaranteed income stream for life, starting at a predetermined future date, usually at retirement age. Individuals can purchase a deferred annuity by contributing a lump sum amount or making payments over an extended period.

While both PRS and deferred annuities provide access to retirement savings, there are a few crucial differences to consider before making a choice. PRS offers flexibility in investments and contributions, allowing individuals to choose from a range of funds to suit their investment preferences and contribute varying amounts depending on their financial situation. On the other hand, deferred annuities provide a guaranteed income stream for life, which means individuals can enjoy a steady and predictable income during retirement, regardless of market fluctuations.

Another critical factor to consider is the management and fees associated with each option. PRS are managed by licensed fund managers, who charge management fees for their services. The fees are usually based on a percentage of the assets under management and can vary from one fund to another. Deferred annuities are typically managed by insurance companies that charge fees based on the contract’s terms.

Additionally, PRS contributions are subject to income tax deductions, which can potentially reduce an individual’s taxable income. In contrast, deferred annuities offer tax-deferred growth, meaning that individuals don’t pay taxes on their earnings until they start receiving payments.

In conclusion, both PRS and deferred annuities are viable options for retirement savings, and the best choice depends on an individual’s financial situation and preferences. PRS offer flexibility in investments and contributions, while deferred annuities provide guaranteed income for life. Individuals should also consider the fees and tax implications associated with each option before making a decision. Ultimately, it is essential to start preparing for retirement early on to ensure a comfortable and stress-free retirement.