When it comes to retirement planning, many Malaysians are unprepared. While the Employee Provident Fund is one of the country's most common forms of saving, The Edge Malaysia Weekly1 reported that 20% of EPF contributors have savings of less than RM7,000 – not nearly enough for retirement.
Everyone’s situation is different, so there is no single rule to follow that will tell you exactly how much money you'll need for your retirement. It will depend on many factors, including:
The age you plan to retire
Whether you own your own home
The rate of inflation
Whether you have debts that you need to manage
Your family and number of dependents
Whether you plan to continue working, in any capacity, and semi-retire
A good starting point is to assume you will need between half and two-thirds of your salary, after tax is deducted, to maintain your current lifestyle.
You may be entitled to a government or state pension, but in most cases it will be difficult to live on this alone. In some countries, they are means or asset tested and are only designed to support those most in need. You should plan to supplement any government pension with savings and investments of your own if you possibly can. Remember, too, that the terms and/or laws guiding government pensions may have changed by the time you reach retirement age.
You may find that your employer has an obligation to contribute towards your pension or retirement fund in proportion to your own contributions. It can help to grow your savings significantly, and you may also be entitled to tax relief on the combined sums saved.
Some employers might also offer ‘contribution matching’, which is when they agree to make additional contributions into your retirement savings, as long as you agree to increase your contributions as well.
Start as soon as you can
The earlier you start saving, the more the interest on your savings will compound, and the longer you will have to save.
Make the most of any tax-free savings and employer contributions you're entitled to.
Build your knowledge. You might want to seek advice from a professional financial adviser.
Check out some of our savings accounts and see if there's one that's right for you.
And if you need more inspiration, we've got even more tips on how to build up your savings.
It’s a good idea to have a number of different types of savings. Learn what options you have for different goals.
Budgeting is a key step to establish where you are starting from, and how much you can afford to save.