As I get older, I have come to realize that retirement means more than just not working; it is about living the life I have 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 am taking control of my future by focusing on pre-retirement planning. I will be exploring 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 have learned as a reference for all, so you can create a plan for a secure and fulfilling retirement. As a reminder, 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. In fact, calculating your retirement income that you needs upon retired is the first step that you need to take.
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. Hence, start your pre-retirement planning as early as you can.
But before that, make sure you have your emergency fund ready first for rainy days. Life is unpredictable. Once this is done, then you can start look into growing your wealth further for your retirement fund.
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 so that you can safeguard your hard-earned savings and ensure a secure retirement. Check out the 4 Simple Rules to Protect Yourself from Scammer to prevent yourself from being a victim of scams. Anyone can be a victim, but be aware that scammers and the relevant syndicates are targeting retirees and those who are vulnerable (financially and emotionally).
The Commercial Crime Investigation Division (Jabatan Siasatan Jenayah Komersil of PDRM) have a webiste, 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 is not required to hire a lawyer or a professional will writer to write one. However, in my opinion, it is best to engage a professional (either a lawyer or professional will company) to prevent any mistakes as it can impact the beneficiaries and asset disbursement.
I used to write my own will, following a template and my witness is my own family member who is also one of the beneficiaries in my will. When I did more reading (Book: Comprehensive Guide to Wills, Probate and Letter of Administration), that is when I realized that the witness to the Will cannot be the beneficiary as well – as in he/she will not be able to get the assets as per in my Will. Hence, it is best to consult a professional on these delicate issues as everyone’s situation differs.
Below are a list of articles that related to estate planning:
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 as I age. 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 a retirement home. Even if you have children, will you want to trouble them if given a choice? It also depends on whether they are able to support you physically, emotionally and financially 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 is important to do a thorough research and check out all the safety features of any assisted living facility or service provider. Do they offer SOS buttons or mobile applications specifically designed 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 is necessary to focus on our physical and mental well-being. Start early in incorporating good health practices as part of your pre-retirement planning.
Nutrition for a Healthy Retirement
For a healthy and active retirement, it is 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 am starting to build up my health-related knowledge. Recently I have also started learning about nutrition from Natalie | Nutrition & Fitness where I bought an online training “The Three Pillars of Health”. It is a quick and fast way to proactively deepen your knowledge of your own health.
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 is a huge relief for your loved ones as well. So, take a deep breath and get started – you got this!
Recommended Pre-Retirement Planning (& Beyond) Reading
Many of us want to ensure we are 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 incredibly helpful in making clear decisions. In the coming weeks (or months), I will be covering some of the books that I have read, currently reading, and what I would recommend for you. Hopefully this will help in your pre-retirement planning.
Kickstart your Pre-Retirement Planning Early
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.