Many of us dream of having a comfortable retirement. But you’ll need to plan for your retirement early to make sure that you have enough money to live on when you’re not working anymore.
If you work for an employer, part of your salary will be deducted for retirement savings in EPF under the government’s mandatory retirement savings scheme. If you’re self-employed, you can make voluntary contributions to EPF.
To help you with retirement planning, we’ve put together how much you need for retirement and what you can do to meet your retirement savings goal!
How much do you need for retirement?
EPF says you need to save up at least RM240,000 by the time you retire at 55 years old to have enough money for your basic needs, like food and daily expenses. With RM240,000, you’d have RM1,000 a month to live on when you’re retired.
This recommended savings is based on the minimum pension of RM1,000 for public sector employees and assumes you retire when you’re 55 and live up to the Malaysian average life expectancy of 75 years old.
But since the recommended savings is based on spending for basic needs, RM1,000 may not be enough for you to have a comfortable retirement.
For you to have a comfortable retirement, you may have to spend some money on medical expenses, your family and entertainment.
So, Bank Negara Malaysia recommends that you’ll need the following amount of money every month, depending on your situation:
- RM2,700 for a single adult
- RM4,500 for a couple without child
- RM6,500 for a couple with two children
Based on Bank Negara’s recommendation, we’ve estimated that you’ll need at least RM578,000 (assuming you’re a single retiree) in savings by the age of 55 to cover RM2,700 in monthly expenses. (Assuming a return of 5% from EPF every year and a 2% inflation rate).
But remember, the amount of money you need for your retirement will really depend on your own lifestyle and needs.
To find out exactly how much you need, you can create a list of monthly expenses you expect to have when you retire and add them up. The list can include household expenses, healthcare, existing debts and dependents you’re supporting like your spouse or children.
To figure out if you’re on track with your retirement savings, here’s a table of the minimum savings you should have for your age.
|Age||Basic Savings (RM)|
You can also use our retirement savings calculator to help you figure out how much you should be saving for retirement.
What can you do to save enough for retirement?
Once you have an idea of how much you need for retirement, you can follow these 4 steps to help you reach your retirement savings goal!
- Find out if you’re on track for your retirement goal
Even though many of us are saving for retirement with EPF, our EPF savings might still not be enough because of reasons like early partial withdrawals, income levels and contributions that aren’t regular (for self employed workers).
So, compare your existing retirement savings with how much you’ll need when you’re 55 to see if you’re on track or if you need to save more.
You can use this table of the minimum savings you should have for your age. You can also use our retirement savings calculator to help you figure out how much you should be saving for retirement.
- Plan your budget
If you’re not saving as much as you should, you may need to plan your budget to see if there is a way you could increase your savings.
Find out what you’re spending your money on. Separate your expenses into things you need and things you want. Prioritise spending on things you need and cut on expenses that you don’t need.
- Think about investing your retirement savings
If you have extra money saved up, and also already have emergency savings, you could think of saving more for retirement by investing.
Over time, your savings will lose value due to inflation. So, investing could help you to speed up the growth of your savings.
How you invest your retirement savings will depend on your age.
If you have many years until retirement and don’t have major debts, you may be able to make more risky investments, like stocks. Because you’re young, you’ll have more time to make up for potential losses.
But make sure you do your research before deciding what to invest in and always put your money into different investments to reduce the risk of losses.
- DON’T touch your retirement savings!
EPF allows you to withdraw part of your savings from Account 2 to buy a home, pay for medical expenses or your children’s education.
But remember, unless you really need to, don’t withdraw your retirement savings. Not only will you end up having less money for your retirement, you’ll also lose out on earning more dividends from EPF!
You may have heard of the recent withdrawal schemes that the government has introduced over the last couple of months. The idea of allowing these withdrawals is to help you if your income has been affected by the ongoing pandemic.
But one thing you have to remember is that the purpose of your EPF savings are for your retirement. Withdrawing your savings now would mean less money for your retirement and you will also lose out on the compounding interest you could have gained over the years.
So, if you really can’t afford your daily expenses and don’t have any other money that you can use, then you might have to withdraw your EPF savings. Otherwise, DO NOT withdraw your EPF savings.
You can read about the latest withdrawal schemes here.
Now that you’ve figured out how much you need for retirement and how to save up for it, are you ready to start growing your retirement savings?