Whether you’re in your twenties, thirties or even forties – it’s never too late to start building your retirement fund.

For many young Malaysians, retirement planning may simply be a passive thought, not a goal that is to be pursued wholeheartedly. With 19% of Malaysians struggling to put down even a single cent of savings per month, it might be naive to expect that the rakyat will be saving decades ahead in advance.

If a wake up call is what you need, this article will guide you through how to start building your retirement nest egg in Malaysia.

1. Picture your retirement lifestyle

What are your retirement goals?

Great, you plan to save “for retirement” – but what exactly are you saving for? Many Malaysians fail to realise that retirement in itself is not a goal. Just like any goal worth pursuing, retirement goals should be S.M.A.R.T.

S.M.A.R.T. Retirement Goals

• Specific
• Measurable
• Attainable
• Relevant
• Time-based

Set one morning aside to have a think about what your major expenditures will be upon retirement. The mainstays usually include:

• Basic lifestyle needs
• Family needs
• Debt repayment
• Emergency reserve
• Setting aside inheritance for your dependants
• Healthcare costs associated with aging

But it doesn’t end there. Perhaps you might fantasise about spending your retirement days playing golf, whisking around the world, or pursuing business ideas that simply weren’t feasible with your previous working schedule.

2. Estimate your retirement figure

How much will you need, and for how long?

In 2019, the Employees Provident Fund (EPF) recommended that Malaysians should have at least RM240,000 upon reaching the withdrawal age of 55.

Keep in mind that this amount only covers basic needs for 20 years, aligned with the average life expectancy of 75 years old. That’s only RM1,000 per month for a single person.

With so many factors involved, it becomes clear that there’s no rule of thumb when it comes to building your retirement fund in Malaysia.

Now that you have a rough picture of your retirement expenses, you can do some guesswork to figure out exactly how big your nest egg needs to be. Since we’re planning decades in advance (especially if you’re in your twenties), it’s pertinent to account for inflation.

If maths isn’t your forte, worry not. Most banks and insurance providers will have retirement calculators to help you better estimate this figure.

Retirement Calculators in Malaysia 2021

• Public Mutual Retirement Calculator
• Great Eastern Retirement Calculator
• OCBC Retirement Calculator
• AXA Retirement Calculator
• Kenanga Retirement Calculator

3. Invest and diversify

How do you plan to achieve that figure?

 Instead of teaching our children to save for retirement, it would be wiser to encourage investing for retirement instead.

No matter how big of a nest you build, wind and rain are bound to wear it away over time. The effect of inflation on your hard-earned savings is non-negotiable. What we can do however, is include it into our retirement planning.

With so many financial tools at our disposal, we can easily invest our funds instead of watching it erode away with inflation. Investing for retirement in particular, is a long-term game where diversifying is particularly important. As we approach the later years of life, protecting our savings takes priority – even if that means playing the long game.

Many Malaysians may be mistaken that their EPF alone will be enough to tide them by their golden years. At present however, only about 60% of Malaysians are contributing the minimum amount to their EPF accounts.

Instead of looking beyond EPF entirely, young Malaysians might do well to place their retirement funds in investment vehicles with better returns, rather than low-yield savings or FD accounts.

When it comes to investing for retirement, many investors opt for unit trusts, where risk is considerably lower and the portfolio is sufficiently diversified.

4. Protect your nest egg

How will you spend your retirement funds wisely?

For the bulk of our adult lives, we’re accumulating wealth. Come retirement, many fail to realise that decumulating that wealth isn’t as easy as it seems.

Decumulation refers to how you draw down your assets so that you have enough to live out your days, without outliving your retirement nest egg. After all the blood, sweat and grit that went into accumulating that much money, how do you prevent yourself from using it up within a span of three years?

Proper retirement planning will ensure you not only have enough to live your days comfortably post-retirement, but also ensure you’re able to savor the fruits of your labour – all the way to the very end.

Consult with our experts to find out the best way to build your retirement nest egg today.