Looking at the current situation of the country and how the economy is going within a couple of months time, we will be facing such a tough time for businesses and investment portfolio. Many financial forecasters told us to get ready for the year 2009. As the downfall will be felt dramatically.

Even now we can see large corporations are cutting cost by letting their employees go. As we all know the price of oil fall lowest in recent years after climbing upwards. Some says the economy will peak at best before falling ad breaking. Right now you can see trends of booming at the end ad to see all coming down just after new year.

Just a few weeks ago the government introduce the 3% cut down for the period of two years from the EPF scheme. Right now you don’t have an option to reduce your EPF cuts but instead you are given the option to maintain the 11% or automatically reduce starting January 2009.

This method arguably will increase the buying power and creating more economics activities for consumers and businesses. As the Deputy Prime Minister said. That’s about it for the pros part of it.

First we got to understand what happened during the downfalls. People will have the choice to save their money then spent it on something they don’t need. Not all people really understand how to manage financial with IQ.

Let’s say Mr A, 35 year-old, earns RM4000 a month. If he takes the reduction, he will have a shortfall of RM2880 in his EPF account after two years. However, if he were to factor in compounded interest, he would see a shortfall of RM7460 when he reaches 55. This calculation are based on assumption that he has no salary increment and interest is calculated once a year.

But if someone to take the reduction to settle their credit cards debt, it is much better as the interest for credit cards can carried you in the long run.

Despite all this, people will help bloster the economic but nothing to help to develope their wealth. The reduction will take effect automaticly January 2009. For those want to maintain their current 11% contribution rate may do so by filling up Form KWSP 17A (AHL) which is available at www.kwsp.gov.my and the form must be submited to member’s respective employers for submission to the EPF.

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