Do you know that the average life expectancy of the Malaysian population is 75 years. This means that you need to have adequate savings for 15 years to at least finance your basic retirement needs.
Do you know that 69% of EPF members aged 54 in 2013 have savings below RM50,000.
Do you know that 50% of retirees exhaust their EPF savings within 5 years.
So, are your savings sufficient for your retirement?
It depends on several factors:
- Lifespan, retirement age, lifestyle, health, family dependents and cost of living
- How you plan your finances before retirement and how they are spent after retirement
How much do you need for your retirement then? Know about Basic Savings.
Basic Savings is the minimum amount of savings needed at age 55 in order to support their basic retirement needs.
The Basic Savings amount is set according to age, which ultimately allows members to have at least RM196,800 (RM820 a month for the period of 20 years) in their EPF account by age 55.
The Basic Savings is also used to determine the amount from Account 1 permitted for members to invest under the Member’s Investment Scheme (MIS).
The minimum amount for Basic Savings is based on the following assumptions:
- a pay hike of 3% yearly for members
- the EPF yearly dividend rate is 4% a year
- the EPF statutory contribution rate is 23% of the monthly wage
Here is the Basic Saving Schedule table (effective 1 Jan 2017):
However, it all depends on your needs and requirements, health condition and lifestyle.
- If you wish to spend RM820 a month for a period of 20 years (55 years – 75 years), you need to have a total of RM196,800 in your savings at the age of 55.
- If you wish to spend RM820 a month for a period of 15 years (assuming that you retire at age 60), you need to have RM147,600 in your savings at the age of 60.
- If you wish to have a better lifestyle, spend RM1,400 a month for a period of 20 years (55 years – 75 years), you need to have a total of RM336,000 in your savings at the age of 55.
But this is only for your basic living cost. What if you have chronic disease or mental illnesses which are common in elderly? Is it really sufficient?
The Employees Provident Fund (EPF) is a retirement benefit scheme that’s available to all salaried employees in Malaysia through management of their savings in an efficient and reliable manner, but rely only on it is not sufficient for your retirement.
How can you increase your retirement savings?
- Diversifying the source of your retirement income
It is important to have more than one source of income so that you will not depend on your EPF savings alone to support you through your retirement years.
- Start saving early
The earlier you start saving, the more money you accumulate when you retire. Cultivate the habit of saving for your retirement as your way of life, you should invest with time.
- Plan for your long-term needs
Identify the main requirements for your retirement, the amount and source of income needed to support your long-term needs. Plan your financial requirements and expenses and save part of your income for any eventualities.
- Healthcare
Perform regular medical examinations and lead a healthy lifestyle. Being healthy will save you from incurring high medical costs which tend to consume most of your retirement savings as well as allows you to work longer so you can increase your savings.
- Invest wisely
A wise investor is a knowledgeable investor. Learn to recognize investment risks and always evaluate your investment activities. Do not invest in ‘Get Rich Quick Schemes’ or with any other unregistered investment companies. Our Money Tree is one of the strategies that can help you to invest wisely with higher return and with low risk.
Remember, withdraw your retirement savings only when it is absolutely necessary and plan to use your retirement savings in ways that could generate a lifelong income. Wish you a happy retirement life. You can definitely have it with an early and wise planning.
