Retirement is a significant milestone in our lives, and proper planning is necessary to ensure a comfortable and secure future. I guess nobody will want to work for money just to make ends meet after retiring. In Malaysia, where retirees are projected to make up a significant portion of the population in the coming years, understanding the ins and outs of retirement planning is more crucial than ever. From EPF contributions to investment options and healthcare coverage, this blog post is what I have or will research about with hope this can be a good reference for others to start. Plan and act as early as possible, time is crucial in preparing for retirement. Imagine, for easy illustration, let say we need RM 100K at age 60 to retire. Start working on the retirement fund at age 40 is much easier compare to age 50. At age 40, we have 20 years with targe monthly saving of approx RM 416 compare to RM 833 if we start at age 50 with assumption the money we kept it under the bed, so without any dividend from investment or FD, etc. And frankly speaking, livingin a city with that amount, in my opinion it is not going to be sufficient.
We have been thinking about retirement planning for quite some time, and I need to be more serious and put in more efforts from today onwards. You have been to Singapore and have meal at the food court, do you notice who are the staffs that are clearning the table, plates, etc? In Malaysia, how many can really retire with enough money to live comfortably, or at least enough for living expenses till the end?
Well, lets begin the journey.
Retirement Money
Save Only Is Not Enough
In today world with inflation getting worst, saving money only under the bed, put into the saving accounts or even Fixed Deposit, we are going to lose to inflation. As of writing, the basic saving account’s inrerest rates per annum from one of our Malaysian bank is ranging from 0.25% to 0.30%, where by for Fixed Deposit it is ranging from 2.40% to 2.70% pa.
There are two type of inflation
- Consumer Price Index (CPI) tracked by the government which track a fixed basket of goods and services. From the average yearly inflation rate below, what do you think? Is the actual inflation rate of the specified goods, foods and services that use same, less or more than the official inflation rate? To me, for the past 2 years, the rising of food prices is quite substantial. A bowl of noodle in the normal food court now is RM 8 to RM 9, and I always making joke on the chinese tea ice, now can costs up to RM 1. Those days, of course ages ago I think it was like 20 or 30 cents, then slowly become 50 cents.
- Lifestyle Inflation, see wiki definition below. In laymen term, it is we increase our spending when our income increased.
Lifestyle creep, also known as lifestyle inflation, is a phenomenon that occurs when as more resources are spent towards standard of living, former luxuries become perceived necessities.
Wikipedia, the free encyclopedia
There is a good article written by FMT on Inflation vs cost of living. You can read it from here.
EPF and PRS: What You Need to Know
Private retirement schemes in Malaysia are primarily managed by the Employees Provident Fund (EPF) and Private Retirement Schemes (PRS). The EPF is a mandatory retirement savings plan for Malaysian citizens and permanent residents working in the private sector, while PRS is a voluntary long-term savings and investment scheme to supplement your EPF savings.
Pensions and Annuities in Malaysia
An important aspect of retirement planning in Malaysia is understanding pensions and annuities. Pensions are provided to eligible government employees, while annuities are financial products that provide a steady income stream during retirement. These options can provide additional financial security and peace of mind in your golden years.
When considering pensions and annuities in Malaysia, it’s imperative to research and understand the eligibility criteria, payout structure, and tax implications associated with each option. Consulting with a financial advisor can help you make informed decisions that align with your retirement goals.
Government retirement schemes in Malaysia also play a significant role in ensuring financial security during retirement. These schemes may include pensions for government employees, social security benefits, and other retirement assistance programs designed to support retirees in their later years.
And with the introduction of KWSP Account 3 (Akaun Fleksible), what does it means for you.
Healthy Aging and Healthcare Considerations
Managing Health Costs Post-Retirement
In post-retirement, many individuals often under estimate the potential healthcare costs they may face during retirement. It is important to plan ahead and consider factors such as medical inflation, unexpected health issues, and long-term care expenses. Setting up a healthcare fund or investing in insurance plans can help provide financial security in the later stages of life. And getting a medical insurance as young as you can is important, as the premium is more expensive based on age. Like most of our parent (the baby boomer) don’t even have medical insurance. Either they opts for government hospital or use up substantial amount of savings for private hospital.
Even you have a medical card from your company as part of the benefits, it is recommended to also get our own personal medical card. Why? What IF I resigned and the new company does not offer medical card benefit? At that time, depends on age the medical insurance is much higher in term of premium and also depends on the current state of health during the application.
Staying Active and Healthy During Retirement
Considerations many retirees find that staying active and maintaining a healthy lifestyle improves their overall well-being and quality of life. Whether it’s engaging in regular exercise, eating a balanced diet, or prioritizing mental health through activities like meditation or socializing, taking care of oneself is necessary during the golden years. I believe the key is to get the mind active. For Chinese, they said playing mahjong (game) is actually good but unfortunately I does not know how to play :p.
During retirement, individuals have more time to focus on their health and wellness. Engaging in activities like walking, swimming, or joining fitness classes not only keeps the body in good shape but also promotes social interaction and mental well-being. Making healthy choices a part of daily routine can lead to a more fulfilling retirement journey.
Lifestyle
I personally life photography even though I don’t see myself as a good photographer. LOL. After I retired, I am still thinking of what kind of lifestyle that I want to have. I will say I prefer a simple lifestyle, do some farming, reading some non-fiction books, watching movies, listening to songs and of course photography. BUT provided I have enough retirement fund, else I will still need find a job even after retired. So pre-planning is crucial, plan ahead as much as we can.
Homes
Who is going to take care of us when we are old? To me, there are two scenarios which is having children or does not have. Nowadays, there are married couple that is without children. Even though with children, do you want to rely 100% on them? Life can be easy or can also be tough for them during our golden age.
If we are going to take care of our ownself, I am thinking either getting a small home (downsize) like 600 sq ft that easy to maintain (think of cleaning, repairing) or check in myself to old folk homes. Depends on situation and financial capabilities at that time, of course getting to a private old folk homes is the preferred choice, and if finacially really very tight, then we can still go for old folk homes run by charity organization or the government. And of course provided there is a space, not fully occupied.
Your Legacy / Will / Funeral
Writing Your Will and Trust Planning
Your legacy is important, and writing a will is a crucial step in securing it. A will allows you to outline your wishes regarding the distribution of your assets and possessions after you pass away. Trust planning is another tool to consider, providing added protection and control over how your estate is handled. Consulting with a professional to draft these documents can ensure that your wishes are carried out smoothly.
I got my own simple Will write up with the template from my sister. But I always feel getting a professional to write it up is more proper, and they can provide advise. A friend of mine from Rockwills, she said the price of writing a Will is depends on the complexity.
Preparing for Inheritance and Estate Taxes
Planning for inheritance and estate taxes is an important aspect of securing your legacy. In Malaysia, estate duty has been abolished, but there are still taxes on inheritance and assets. Understanding the implications of these taxes and taking steps to minimize them can help preserve more of your assets for your heirs. Seeking advice from a financial planner or tax advisor can help you navigate this complex area and make informed decisions.
Securing your legacy and planning for the future is a thoughtful way to take care of your loved ones and ensure that your assets are distributed according to your wishes. By taking the time to write a will, consider trust planning, and prepare for inheritance and estate taxes, you can protect your legacy and provide for the ones you care about most.
What Do You Think?
To summarize up, retirement planning in Malaysia is crucial for individuals to ensure financial stability during their retirement years. By taking into account factors such as inflation, healthcare costs, and lifestyle preferences, Malaysians can effectively plan and save for their retirement. It is never too early to start planning for retirement, and seeking professional advice can help individuals make informed decisions to secure a comfortable and worry-free retirement.