It’s a very important part of life where everyone of us look forward to. It is a much needed break to enjoy life at its fullest in your own pace after working so hard to make ends meet or to raise a family. Retirement it is. According to statistics based on the Nielsen’s survey, Malaysians wants to retire early, and they rank the highest in Southeast Asia who plan to retire or have already retired before the age of 60, standing at 50%. It is great to retire early, but according to a number of other articles shown, many Malaysians are not financially ready to retire, even the retirement age was pushed up to 60. With the rising cost of living escalating, inflation and other factors, it does feel as though retirement is just nothing more than a dream.
However, in reality, retiring early is actually “POSSIBLE” with sound financial planning. But, retiring earlier does not mean that you don’t have to earn any money. In fact, an early retirement may give you the freedom to pursue your own interest and work, allowing you to earn money at your own pace rather than the pace of the working world. In other words, an early retirement means doing what you love and passionate about. For those who wish to retire in their 30s, based on research, it was shown that they will need to earn 25 times their annual expenses. It’s a hefty amount, especially for an average Malaysian. An average account executive in West of Malaysia earns about RM35,145 a year. That means if they want to retire around their 30s, they will need to have a retirement fund amounting to RM878,625 and even then, that may not be enough with the rising cost of living and hospital expenses.
But just because it looks like an uphill climb, that doesn’t mean it’s completely impossible. If you really want to retire, doing your saving and planning now is crucial. The key to retirement is how to raise the funds that you need to support yourself when you decide to leave the workforce. It’s still important to contribute to your EPF, but depending only on your EPF is not a great idea, as this can only fund a part of your retirement. An active EPF member now needs to have a minimum of RM196,800 in their account by the age of 55. This, according to EPF’s calculations will last you 20 years if you frugally live within RM820 per month. RM820 a month? Most of the Generation Ys of today might just use up RM820 in just one of the weekend nights. Whilst this may be feasible if you have no rent or car payments to make (nor any other loan for that matter) which is highly impossible, it seems a highly conservative number. It’s also important to factor inflation and what costs of living may be even 5 years from now.
This is why it’s important for Malaysians to diversify their portfolio and look into different ways of investment. This can come in bonds, stocks, unit trusts and property. As long as you aim for a steady return and you understand the tax implications, doing these different investments can help in raising enough money for your retirement. But, most, if not all people have a wrong perception in investing into insurance companies. In fact, most life insurance companies make the most profit and chances of them getting hurt from a financial crisis has little or no effect.
It collects a lot of premiums or money but pay very little out. They like its profitable business model of probability. One of the investment portfolios of the multi billionaire Warren Buffet. That said, investing into what we call “annuities” in insurance companies that gives a guaranteed perpetual income by helping you to create wealth through crisis will provide for a person’s retirement needs. But investing in the CORRECT life insurance company’s product is also very crucial. Bigger companies give higher dividend and hence a higher return. It does not only guarantees a regular income for early retirement, it also provides average returns of investment that is consistent and attractive, most importantly will not be affected by the economy.
Napoleon Hill’s Think And Grow Rich said : “Do not wait, the time will never be ‘just right’. Start where you stand, and work whatever tools you may have at your command and better tools will be found as you go along.”
It is never too late to start diversifying and maximizing your wealth through knowing what to invest. Read my next article here on why you need to understand which business to invest in for sound retirement.