As I get older, I’ve realized that retirement is about more than just not working – it’s about living the life I’ve always wanted. But, I know that without a solid plan, my dreams of financial freedom (or I like to call it time freedom) and peace of mind may remain just that – dreams. In fact, not enough money to sustain my retirement life is going to be a nightmare. That’s why I’m taking control of my future by focusing on pre-retirement planning. I will explore important questions during this journey, including figuring out how much retirement income I need to create a plan for my legacy. I will share what I’ve learned as a reference for all, so you can create a plan for a secure and fulfilling retirement. Of course, always consult a professional in the respective area of your retirement plan.
Retirement Income
This is one of my top primary concerns in pre-retirement planning, and probably for many of us too. Unless we already have more than enough already in terms of net worth, else it is a must to start plan and take action. Saving enough money for retirement takes time. I believe in compound interest, and it needs time to its magic to grow into a substantial amount. I have written a post on compound interest where I simulate the based on the number of years. There are few questions that I need to know in order to come out with a more realistic retirement fund that I need. Below is what I need to find out.
Calculating Your Retirement Needs
Your retirement needs will depend on several factors, including your desired lifestyle, location, and expenses. To maintain your lifestyle in retirement, aim for at least 70% of your pre-retirement income, as suggested by Amelia Hong, the author of the book In/Outcome. She also commented 50% is considered average and 30% is awful.
Budgeting for the Future
Retirement budgeting requires careful planning to ensure you have enough money to cover your expenses. You’ll need to consider not only your crucial expenses but also discretionary spending, such as travel and hobbies. Plus, it’s crucial to factor in inflation, healthcare costs, and potential long-term care expenses. Effective budgeting allows you to take control of your finances and maximize your retirement income. So the post-retirement journey/planning is also important. I need to consider how I foresee my retirement lifestyle and identify any additional expenses that I should account for in my pre-retirement planning.
One item that I missed out is the loan, especially on home loans. In Malaysia, the maximum tenure for a home loan can be up to 35 years or 70 years old, whichever comes first. Imagine a person with a home loan up to 70 years, after retiring at age of 60, but still have to serve the home loan for another 10 years. So he/she needs to factor in the monthly installment into the budget. Of course, I assume that the home loan is for an own-stay property. For a rented investment property, you can collect rent to cover the mortgage, but remember to account for potential vacant months between tenants. Alternatively, you could still choose to sell the investment property. However, we need to budget for the installment even if it is for our own-stay.
Growing Your Wealth
Your wealth growth strategy should be tailored to your individual needs and risk tolerance. Invest in a mix of stocks, REIT, bonds, and other assets using tax-advantaged retirement accounts like EPF (KWSP) or PRS. The PPA (Private Pension Administrator Malaysia) website states that an annual tax relief of RM3,000 is available until 2025.
Understanding your investment options and risk tolerance is key to growing your wealth over time. By starting early and being consistent, you can build a sizable nest egg to support your retirement goals. Most young people will never think of the topic of retirement planning. But my question to you is, why not? You can target your retirement age earlier instead of the official retirement age of 60. By starting early, you can save more for retirement and enjoy a comfortable life after you turn 60.
Protecting Your Savings
In 2023, Malaysia saw a staggering 34,497 reported cases of online scams, resulting in estimated losses amounting to RM1.218 billion, as revealed by the Majlis Keselamatan Negara. So it is important to protect your retirement savings from all the scammers.
By being vigilant and informed, you can safeguard your hard-earned savings and ensure a secure retirement. Below is a list of articles related to scams, equip yourself with knowledge.
4 Simple Rules to Protect Yourself from Scammer
And the Commercial Crime Investigation Division (Jabatan Siasatan Jenayah Komersil) have a site called semakmule to verify and check the list of mule bank accounts, phone numbers, and shell companies used by scammers. In my opinion, just because what you searched for doesn’t show up in the semakmule, it doesn’t guarantee it’s completely safe. It’s possible that no one has reported it yet. So please do proper due diligence.
Legacy Planning
For many of us, leaving a lasting legacy is an important aspect of pre-retirement planning. We need to ensure our finances are secure and our loved ones are cared for, respecting our wishes after we pass away. And most importantly, to maintain harmony among family members. Nowadays, there are couples that are without children, and legacy planning is still important. You can give it away to others closer family members/relatives or charity organizations.
Estate Planning Essentials
Estate planning is a critical component of legacy planning, and it’s necessary to get it right. I recommend creating a will, establishing trusts, and designating beneficiaries for your assets. This will ensure that your estate is distributed according to your wishes and minimize any potential conflicts or legal issues.
In Malaysia, it’s not required to hire a lawyer or a Wills company to write a Will. In my opinion, it’s always a good idea to seek advice from professionals to avoid mistakes.
I used to write my own Wills, and I asked a family member to be a witness. However, this family member is also a beneficiary of my Will. After my further research and reading a book about Will in Malaysia, that will affect the beneficiary. She will not get the assets as per my Will.
Funeral Pre-Planning
Estate planning also involves thinking about the inevitable, including funeral arrangements. Planning your funeral in advance can ease the emotional and financial stress on your family, so they can focus on honoring your life instead of dealing with logistical concerns.
A funeral pre-plan includes details like the type of service, final resting place, music, and flowers. Making decisions in advance ensures that your wishes are respected and relieves your family from the burden of making tough decisions in a challenging period. Additionally, pre-planning can also help you budget for funeral expenses, which can be a significant cost.
Funeral pre-planning involves two parts: the funeral package and the final resting place. As of writing, I have done my pre-planning for both of them with the representative/agency of Nirvana Malaysia. The good thing is we can opt for an interest-free installment plan. I have fully paid for my 3 days and 2 nights funeral package, and for my final resting place, it is still under installment.
Assisted Living
As I plan for my golden years, I need to consider the possibility that I may not be able to take care of myself independently. This is a crucial aspect of pre-retirement planning, as it can significantly impact my quality of life and financial security. Depends on my financial capabilities at that time, either hire a live-in maid or check-in myself into old-folk homes. Even you have children, will you want to trouble them if giving a choice? Plus it also depends whether can they suport or taking care of the parents at that time.
Planning for Independence
Preparing for the future means thinking about how I can maintain my independence for as long as possible. This includes considering ways to stay healthy, active, and engaged, such as taking classes, volunteering, or pursuing hobbies. By doing so, I can reduce my reliance on others and maintain my autonomy.
Safety Features
Any assisted living arrangement should prioritize safety above all else. This includes features such as smart home technology, safety monitoring systems, and easy access to emergency services.
It’s imperative to research and evaluate the safety features of any assisted living facility or service provider. Do they provide SOS buttons or mobile apps for emergencies? Are their staff trained to respond to medical emergencies? By asking these questions, I can ensure that I’m protected and cared for in my golden years.
Healthy Living
All aspects of our lives play a crucial role in ensuring a happy and fulfilling retirement. As we approach this new chapter, it’s necessary to focus on our physical and mental well-being.
Nutrition for a Healthy Retirement
For a healthy and active retirement, it’s vital to fuel our bodies with the right foods. Eating a variety of whole foods, fruits, and vegetables every day can keep your energy up, help you manage your weight, and lower your chances of getting chronic diseases. I am learning about nutrition and its impact on my health as I prepare for my retirement. I started to learn more about health related knowledge, and I am following the teaching from Natalie Loo. Recently I bought one of her online training sessions on “The Three Pillars of Health”. It is informative and interesting knowledge that she is sharing. You can check her out at her TikTok account at Natalie | Nutrition & Fitness.
Staying Active
Type of exercises that bring me joy and keep me moving are necessary for a healthy retirement. Whether it’s walking, swimming, or dancing, regular physical activity will help maintain flexibility, strength, and mobility. If you are a person like me that does not exercise, choose one that you like the most to start. Let’s say, swimming is better than walking at the park, but walking to me is much easier than me going to learn how to swim. I will begin by incorporating walking into my exercise routine to increase my chances of successfully building a new habit.
Staying active is not only about physical health; it’s also about mental well-being. As I engage in various activities, I feel more connected to my community, reduce stress, and boost my mood. I prioritize exercise and socializing to stay active and engaged in my retirement.
And most importantly, start exercising habits while young. As if we only start after retirement, there is limited exercise that we can do.
Settling Affairs
Now that we’ve talked about how important it is to plan for our retirement income and legacy, it’s time to start thinking about organizing our affairs. This might not be a pleasant topic, but it’s important to get everything in order, so you can enjoy your retirement with peace of mind.
Tying Up Loose Ends
To ensure that your loved ones aren’t left with a mess to sort out after you’re gone, take some time to tie up loose ends. Organize your important documents, like your will, trust, and life insurance policies. Ensure that your beneficiaries are up-to-date. Consider planning your funeral and final resting place in advance, along with resolving any remaining debts or obligations.
Take care of these details now, so you can relax and enjoy your retirement, knowing everything is sorted. And, let’s be honest, it’s a huge relief for your loved ones as well. So, take a deep breath and get started – you got this!
Recommended Reading
Many of us want to ensure we’re well-prepared for retirement, and reading about it can be a great way to get started. As someone who has gone through this process, I found that reading books about planning for retirement was incredibly helpful in making clear decisions. I am going to write another blog post to share some of the books that I have.
Final Words
Pre-retirement planning involves considering different aspects, such as retirement income, legacy planning, assisted living, and maintaining good health. I want you to remember that you can achieve financial freedom and peace of mind. Taking charge of your pre-retirement planning will help you enjoy your later years with confidence and clarity. So, take the first step today, and start building the future you deserve.