How to ensure you don’t outlive your retirement saving?

There is a research from Employee Provident Fund Malaysia (EPF) shows that 70% of Malaysians outlive their retirement savings. This is a very sad statistic.

Due to the pandemic, many Malaysians are struggling hence the government has just announced (26 Nov 2020) to allow eligible Malaysians to withdraw their compulsory retirement saving (Employee’s Provident Fund). Read the news here.

This will in fact affect many retirement plans, especially those who do not plan well for their financial future. There are two reasons why the retirement saving is not enough:-

1. Malaysians underestimate the retirement needs. Many think that they would have earned enough money when they are older. Hence, they do not save or do not save enough when they are young.
2. Life expectancy is getting longer due to the advancement of medical equipment and technology.

To make sure one do not outlive his / her retirement saving, here are some tips:-

1. Understand how much you need for your retirement. You can read more on how to calculate your retirement amount here. Awareness is the beginning of a change. Many people do not save enough because they do not understand the retirement amount needed is huge. Once they know the figure, it is more likely they will plan well to save more.
2. Start to save early. The retirement figure is huge. Say one needs RM 1 million to retire, if only 5 years are remaining before he retires, he needs to save RM 200,000 a year. If he started 15 years earlier, the required saving amount will be RM 50,000 a year only.
3. Start to invest. Investment can help one’s saving grow faster. To reach RM 1 million retirement sum, one needs to save RM 50,000 a year for 20 years @ 0% interest. If he chooses to invest @ 5% interest rate, the amount that he needs to save is much lesser, i.e. RM 30,300 per year.
4. Be healthy. One of the most expensive bills during the retirement is the medical bill. Ensuring good health will reduce the expensive medical costs. In addition, it is important to get yourself covered with medical insurance to avoid your saving being wiped out for medical expenses before your retirement. While being healthy, you can choose to work part time during your retirement to earn some income.
5. Diversify your investment portfolio. While investing, never forget to do the risk allocation for your investment assets. During retirement, the investment income is needed, hence investing in extremely aggressive or volatile assets would not be suitable. Try to get to more aggressive investment portfolio when you are young but switch to less aggressive investment portfolio when you are nearer to your retirement age.

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