Retirement Planning in Malaysia, How Much Money Do You Need?

Kali terakhir diperbaharui November 22, 2023 oleh Shafiq Wahab
Retirement Planning in Malaysia, How Much Money Do You Need?

After working for 30 to 40 years, you must want to retire peacefully and not have to worry about money anymore, right? Retirement planning is something that should be taken seriously even though you may feel that it is still a long time before you retire. This article will explain how to determine the amount you need for your retirement planning in Malaysia.

When You Should Start to Think About Your Retirement Planning in Malaysia?

If you are a private sector employee, there will come a time when you will only depend on your savings or EPF money. Unlike government sector workers who usually get pension money every month after retirement, you as a private sector retiree will receive a large sum of money all at once through your EPF account.

One of the biggest challenges when you receive such a large amount of money is making sure you can use it as well as possible and save with that amount over a long period of around 15 to 20 years. The money you receive is what will be used to cover your monthly expenses after retirement.

Because of this, you need to consider this matter seriously because your financial situation plays a very important role when you retire later. Good and strategic retirement planning will help you be better prepared to face all the challenges that will arise. 

Recommended Retirement Amount

The answer to this question is subjective because it depends on your own lifestyle or the lifestyle you want after retirement. You also need to take into account the amount of liabilities you have as well as the amount of debt commitments you need to fulfill such as car loans or housing loans.

The EPF has suggested a minimum amount of money for retirement of around RM228,000 to RM240,000 from 1 January 2019. However, there are still many Malaysians who cannot even reach this amount when they reach the retirement age of 55.

Roughly speaking, this recommended amount is still not enough. Imagine if you retire at the age of 55, for you to live for the next 20 years after retirement with that amount, you can only use around RM1,000 a month.

However, this amount is determined for daily necessities only. For you to enjoy a comfortable retirement, you may need more money for medical expenses, family dependents, insurance, vacations and entertainment and so on.

Each individual has a different lifestyle and you may end up spending more than RM1,000 a month, especially if you have dependents such as family members. Bank Negara Malaysia has issued a recommendation for the amount of spending money you need to prepare each month depending on three categories:

Category Total Monthly Expenses Recommended by Bank Negara
Single Adults RM2,700
Couple Without Children RM4,500
Couple With Two Children RM6,500

Based on the amount of expenses recommended by Bank Negara Malaysia, you will face difficulties to survive the days of retirement with RM240,000 in savings as recommended by the EPF. To live comfortably in the next 15 to 20 years, you will need more savings.

For example, an individual with a single status needs RM2,700 per month based on Bank Negara’s recommendations. This means that the individual needs savings of around RM500,000 to RM600,000 to live a comfortable life after retirement.

Factors You Need to Consider Before Retiring

Here are other financial commitments you may have to make after you retire:

  • Financial responsibilities for spouse, children or other dependents
  • Children’s tuition fees
  • Housing Loans or other outstanding debt commitments
  • Buying a new insurance policy if you previously relied on the cover provided by the company or you have reached the age limit of the existing policy
  • The rate of inflation due to the price of goods will most likely not remain the same and will rise in the future
  • Your lifestyle such as how often you want to go on vacation and so on
retirement plan in malaysia

5 Retirement Savings Tips

It doesn’t matter if you still have 10, 20 or 30 years left, you need to think about life after retirement from now. Once you know how much money you need to retire and how long you have until retirement, you need to find the best way to reach your goal. Follow the five retirement savings tips below:

1. Calculate the Monthly Expenses Cost

It is important that you determine the spending budget each month with the money you will receive in large amounts from the EPF. You need to plan your budget by knowing how to manage your salary so that you can increase the amount of existing savings.

Separate your spending into what you need and what you want. Prioritize spending on things you feel are more important and reduce spending on things you don’t need.

After retirement, you no longer get a source of income every month, unless you choose to work part time. Your mission is to ensure that you can survive on your savings after retirement.

2. Start Investing 

Investments can help increase your retirement savings and this is one option you can consider. Types of investment are divided into two, namely low risk investment and high risk investment. Which one should you choose?

This choice should be made depending on your situation and age. If you are approaching retirement age, you are advised to invest in investment platforms with lower risk such as Private Retirement Schemes (PRS), ASB investments, Tabung Haji, Takaful and so on.

If you are young and new to work and want to plan for your retirement, you may consider making higher-risk investments such as stocks. However, make sure you do comprehensive research before making an investment. Moreover, you can also invest in low-risk platforms if you don’t want to take high risks.

3. Don’t Withdraw EPF Savings If You Don’t Need To

Although the government recently allowed a one-off withdrawal of RM10,000 from 2 EPF accounts, this does not mean you have to withdraw it. You are not encouraged to withdraw it unless you really desperately need the money for certain purposes, especially to continue survival. Avoid withdrawing this money for investment or as business capital.

Remember, the purpose of your EPF savings is for your retirement. This means, withdrawing your EPF savings now means your retirement money will be reduced. EPF money of RM10,000 is not a small amount. Imagine with an EPF dividend rate of six percent per year, RM10,000 can grow to RM17,908 after 10 years, to RM32,071 after 20 years and to RM57,434 after 30 years.

4. Beware of Scammers

Many scam cases that occur in Malaysia usually happen to people who are approaching retirement age or who have retired. Scammers with high abilities can ‘smell’ a lot of money that has entered or will enter your account. If you read the news regularly, you will find many retirees who have lost all their retirement savings due to scammers.

Usually, the scammer will promise a high return of money in a short time. For those of you who may want to double your savings for retirement, it may interest you to get involved with such a scheme. Therefore, if you are offered to put your money into a dubious scheme that promises ridiculously high returns, do not rush into a decision and seek the advice of your financial expert.

5. Settle All Existing Loans As Soon As Possible

If possible, plan your debts and commitments starting now. Avoid spending or going into debt beyond your means. If necessary, save money first before buying the things you need to avoid high accumulated commitments until you reach retirement age.

If possible, when you retire, you will only have at least one loan left for you to settle. This way, you can enjoy your retirement better and you don’t have to worry about other commitments and debts that need to be incurred.

retirement age in malaysia

Plan Your Retirement Savings As Soon As Possible

Good retirement planning will help you enjoy a quieter life in the future. If you have not yet started planning your life after retirement, you are advised to start thinking about this starting now. This is because, retirement planning will take years to achieve the set goals. It is hoped that sharing this article will help you.

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Personal finance management expert to help you manage your finances better!

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