You need between RM1.4 million and RM2.8 million by 2027.

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Where will you will be when you’re 64?
Get a head start for twilight years


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A life of comfort and good health in retirement is not beyond the average Malaysian executive despite cases of some who ended penniless after wasting their Employees’ Provident Fund savings in poor investments. Financial experts say prudent investments in sound financial instruments can yield handsome returns in old age. ANIS IBRAHIM, SUGANTHI SUPARMANIAM, HEIDI FOO and PRESENNA NAMBIAR have the stories.


CAN a 35-year-old Malaysian executive earning about RM4,000 a month afford a comfortable lifestyle after retirement at 55?

This is a question often on the minds of those on the threshold of middle age but which seldom yields a definite answer.

Yes, it is possible to live the same lifestyle in 20 years’ time but it is going to cost a bomb.

One will need to have between RM1.4 million and RM2.8 million at retirement to maintain the same lifestyle depending on which financial planner one talks to.
Besides inflation, which will reduce the amount of items one can buy in 20 years with the same amount of money available today, there is also the astronomical cost of medical treatment in old age.

Malaysians will have to bear much higher medical costs in the twilight of their lives, especially so in the light of the longer life expectancy of Malaysian men and women of 72 and 76 respectively.

Despite the frightening prospect of not having enough money in old age, there is still good news for most: Good financial planning can ensure a problem-free retirement.

The first step to take is to realistically identify the lifestyle one wants at retirement and work towards attaining it.

The next is to identify the financial instruments to be used to accumulate between RM1.4 million and RM2.8 million by 2027.

Integral to this would be the savings one accumulates with the Employees’ Provident Fund — about RM500,000 for the person earning about RM4,000 at 35 years of age.

Financial planners suggest several ways of going about this including investing in the stock market, unit trusts and property, saving money in the bank and buying an endowment insurance policy.

But how much should one invest to live comfortably after retirement?

Some financial planners say one should put aside a third of the monthly income — or RM1,300 for a person taking home RM4,000 a month — for investments.

Others say 20 per cent would suffice if one cannot afford more.

While these may hold promise of a rosy future, there are unexpected pitfalls for the unwary, including the vagaries of the stock and property markets and the general economic condition of the nation.

For those who cannot expect as much monthly after retirement as they did while working, the CPFsuggests that they work on estimated monthly financial returns of 40 per cent of their salaries.

This is based on the International Labour Organisation’s (ILO) “replacement rate” for salaries after retirement.

CPFofficials say that while 75 per cent would come from their CPFsavings, Malaysians would still have to depend on other sources of income for the rest.

Developed countries like the United Kingdom and the United States apply a replacement rate of between 60 and 75 per cent of the average monthly salary.

All told, the average 30-something Malaysian in the private sector cannot depend on his CPFsavings to ensure a comfortable lifestyle in retirement.

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