Many Malaysians do not come up with a retirement plan until they reach mid to late forties. In actual fact, we must plan our retirement as early as possible; if possible, from the day we enter the workforce. There are many factors that make retirement a struggle for Malaysians today.
Some of these factors are:
- Most Malaysian retirees today tend to live a more active lifestyle
- More and more couples marry and start a family at a later age
- Many retirees have to rely on themselves for their own living expenses; they don’t receive support from their children.
- Their retirement fund was affected by inflation
Don’t worry though, there are many ways to plan for your retirement fund. The most common way is your EPF savings which is a monthly forced saving. Unfortunately, statistics have shown that more than 75% of EPF members do not achieve the minimum savings set by the EPF board. There are also horror stories about EPF savings used up within a few months. It would be safer to assume that you would be unable to sustain your retirement life with EPF savings alone.
You should explore alternate ways to plan for your retirement fund. Here are some suggestions you can start off with:
- Private Retirement Scheme (PRS)
- Insurance
- Annuities
- Interest Income
- Business Income
- Dividend Income
- Capital gains from liquid investments
- Sale of property
- Rental Income
- Bonds
- Equities
- Part time career
There are many other ways besides the ones mentioned above.
Some Malaysians plan to rely on their children during their retirement life. This is a mistake. If your children give you allowance and support you, it is a bonus and you should consider yourself very lucky. You should only rely on yourself during retirement.
Many youngsters do not start saving for retirement because they feel that life is short and they want to enjoy today. On the other hand, some young Malaysians want to save for retirement but don’t know how to start. This issue can be easily solved by seeking advice from a financial planner.
Whichever stage you’re in – whether you’ve just entered the workforce or close to retirement – here are some tips that may help:
1. Set Your Personal And Financial Retirement Goals NOW
Draft out a budget to figure out how much monthly savings you can put aside for retirement. Your major expenses would most likely be housing loan, transportation and medical care (or insurance).
Consider whether you want to own a house or rent one. Do you need to own a car or will you rely on public transportation? Do you want to depend on the government or children for your medical care or do you prefer to go to a private hospital?
How much do you need for optional expenses like travel, entertainment, hobbies, gifts and leaving an inheritance? The answer to all of these questions depend on your lifestyle and personal preference.
2. Accumulate Income Sources
You must be aware that inflation will impact the value of your money – especially during retirement because you will not be actively earning anymore. Hence, you need to monitor your investments and decide which one can be liquidated for passive income source during retirement.
Estimate the expenses you need to spend during retirement. Then, check whether your retirement fund is enough to cover your expenses for the rest of your life. If it isn’t enough, you still have time to increase your monthly savings amount and to achieve the highest return on your investment by managing the risks.
Save as much as you can by reducing any unnecessary expenses. Besides that, explore alternate ways to increase your income. Maybe you can find a part-time job or work harder to get a promotion and salary increase.
3. Converting Assets: You Have More Than You Think
Convert your dormant cash (or ‘lazy cash’) into working capital and stop the liquidity addiction. Make your money work for you! You may convert your home equity, antiques, collectibles, jewellery and also hobbies (if it’s possible to earn money through your hobby).
4. Make Investment For High Returns
The highest return asset classes are also the most volatile. You should invest for the long term to have safe, yet high returns. The main rule is to wait through the down years. You also need to invest for both short-term and long-term retirement objectives. Hence, you must invest not just from now until retirement but from now to the end of your life.
5. Be Aware Of Market Cycles
Be aware of the current market realities and cycles when you choose your mix of investments. Get help from a financial planner or portfolio expert. Income stocks are secure and able to pay large dividends which will help you keep your portfolio growing.
Our life cycle evolves, the economic boom comes and goes, and our life events are different every year. Hence, we must review our retirement planning every year. Don’t plan it once then expect it to be a perfect plan that lasts forever.
You should review and share your plan with your life partner. Create a plan together so you can work together towards it hand in hand.
