If statistics are right, by 2020, 3.4 million Malaysians (9.9% of Malaysia’s population) will be over 60 years of age1. That means almost one in 10 persons will likely be in retirement age.-HSBC MALAYSIA
One might say that retirement planning a boring subject. Others might think that its too early to plan for retirement. During my interview with some of the pre-retiree, i ask them this question, “Do you know how long can your retirement money last?” surprisingly 70% of them will have no clue or or don’t care.
While most of the government staff think they do not need to save for retirement because they have gratuity and government pension.
There is one rule of a thumb you need to be aware of. You need 70% of you last salary to live comfortably, assuming you have paid off most of your debts
The 5 popular retirement myths
1) EPF savings is enough for my retirement.
Lets talk about the majority of the non-government worker in Malaysia.
An active EPF member can save an average of RM158,302 by the age of 54, this amount will only last for 20-25 years -says.com
i will show you later if you factor in the inflation rate, the EPF fund won’t last that long. its’t that scary?
2) my children will take care of me.
20 years ago this ideas might works, but in today’s high cost of living, a fresh grade can barely earn enough to support the basic needs such as car installment, fuel and other related expenses. Young couple find it quite hard to provide for their own family and children as they move to the next stage in life to own a house and provide college fund for the children.
3) Its too early to plan for retirement.
i was at a Prudential annual conference july last year 2013. A MDRT (million dollar round table) platform speaker told this.
when should you start saving for retirement? you should start the day you are born-sanjay tolani
What if i tell you there is a huge difference between saving now, and saving 10 years later.
The power of starting early. If one is to achieve RM500,000 by the age of 50, base on and average interest rate of return 5% per annum.
Option 1: if you start age age 25, you will need to save RM836/month.
Option 2: if you start age age 35, you will need to save RM1,863/month.
my question is which option feel easier? or you might want to know other option?
Option 3: Start saving at the age of 1. you will only need to save RM200/month to achieve RM516,200.
your parents only need to do their part by helping you to save while you are still children. when you are independent, you can start saving for yourself.
4) i will find another job after i retire
There is no certainty that someone gonna hire you at your golden age. Retirement is mean for enjoyment. finding values with family, pursuing your aspirations etc. you don’t want to miss/waste the final stage of your life.
5) i will spend much less when i retire.
If you retire with no other saving and you rely 100% from your EPF fund, assuming you haveRM200,000 and inflation rate at 3.2% per year.
- at age 60, if your take out RM1,800 monthly from your fund, your money will finish in 9 years @ age 69
we you will tell me, i won’t use that much during my retirement, what if i cut it to half?
- at age 60, if you take out RM900 monthly from your fund, you money will finish in 19 years @ age 79
my question to you is, is RM900/month enough? are goods getting cheaper every year?
The Fact is
- 90% of EPF contributor have less then RM100,000 in their account.
- 99.9% withdraw their EPF saving in a lump sum once they reach age 55.
- 70% of the retiree use up all their EPF money in less then 3 years after retiring.
- 41% of malaysian do not have plan to build their retirement fund.
- Most do not separate their retirement saving from other saving. Among those who do, 83% would use up their retirement saving should the need arise.
- 73% do not seek advise form professional financial advisor.
- 39% intend to work beyond retirement age to supplement their retirement income.
Do you want to be part of this statistic? Start early, Don’t risk your retirement money especially when you are closer to retirement. And make sure you have enough life insurance and medical coverage in case its not a smooth journey.
What i do as an advisor is to help you and family by providing you with a clear picture to your retirement. Helping you to get rid of unnecessary debt, preserving wealth and providing value for families. If you would like to know the service i provided to my client please feel free to drop me an email i will be glad to assist you.
wishing you a joyful harvest festival.