Plan For Retirement

You’re not fussy: you don’t have lavish dreams of spending your golden years figuring out with the Tower of Pisa leans or if you can get gaseous from drinking champagne on a moving yacht. You’d be perfectly happy crocheting or watching Astro in a small but comfortable home in Seremban (or whichever sleepy town you choose to escape the bustle of your-once City life).

Because of this, you think – hey, I am covered. I’ve got a tidy EPF sum which should be enough for yarn and the occasional mamak outing. But is it?

The question we’d like to pose here is this: is it viable to depend only on one’s EPF (Employees Provident Fund) to tide you through till the “day of reckoning”?

Is It Possible to Go On?

Unlike Celine Dion’s heart; you probably can’t go on without the necessary monetary sustenance. So you really do need to ask yourself some pertinent questions about your retirement savings. Let’s take a look at some factual snippets to determine if your retirement is going to be more like Jack or Rose (He really should have found himself a door when he had the chance):

- According to the 2013 annual report of EPF, it shows that the average savings for active members by the time they hit the age of 54 stood at RM166,650.
- The average savings for inactive members in their EPF accounts is RM26,250.

Without a second thought, the amount doesn’t look very appealing for the golden years, does it? It certainly isn’t enough, according to the CEO of the Private Pension Administrator Malaysia (PPA), Datuk Steve Ong. He was quoted as saying that if an individual’s lifestyle and expenses amount to RM5,000 a month, then that will be RM60,000 a year. The simple math is enough to scare anyone! And this hasn’t begun to factor inflation.

So How “Golden” is it After Retirement?

Did you know that about one third of Malaysian retirees (33%) have reported that their expenditures either stay the same or increase upon retiring? This could be why there is a growing preference of a semi-retired status, with close to half (about 54%) of non-retirees having planned for semi-retirement. This is much higher than the global average of 42%!

Datuk Steve Ong has a rule of thumb for all those who are already worried by this time about saving for the golden years. On would need at least two-thirds of their last drawn pay in order to continue with the current standard of living. He went on to say that at least “one-third of a person’s salary should be put away now, in order to achieve two-thirds post retirement”.

If you’re worried that just a simple savings plan isn’t going to be enough to help you meet the shortfall and you’re absolutely hopeless at buying investment products; the PRS (Private Retirement Scheme) might be your answer. It’s different from the EPF in a few key ways; contribution is voluntary for those aged 18 and above, there is no guaranteed return as opposed to the EPF’s minimum dividend of 2.5% and the PRS is managed by private financial intermediaries. However, it is an additional and complementary avenue to save, providing added security for contributors’ retirement years.

On a final note, 85% of retirees in Malaysia regret not saving more for their later years, according to “The Future of Retirement: Life After Work”, a report by HSBC. Would you really like to be a part of that statistic, or would you rather start following that rule of thumb, and save now in order to live out the rest of your life in blissful peace? After all, those years are not called “golden” for nothing.