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A famous author once said, “Put the end the beginning.”

Yes, to plan for a golden retirement, you have to visualise your retirement days. Would you have sufficient money to last through the rest of your life? Have you provided for long term care? Do you have sufficient cashflows at various intervals to provide for major purchase items such as changing a new car every ten years? Unless of course, you are planning to drive your existing car until death do you part. Have you allocate for major repairs or renovations to your house? Would your health be good for you to enjoy a healthy and comfortable retirement.

To set you going, you should review the nine steps about planning your retirement.

1 When do I want to retire?

Let me emphasis the most important rule in retirement planning. Retirement is not a function of age. Retirement is a function of affordability. A 70 years old man with no savings must still work for his meals, whereas a 20 years young man with an inheritance of RM 50 millions can retire immediately. Therefore in determining the retirement age, it is also important to consider your post-retirement needs. Factors to consider in retirement would be your health, your children’s ages and your financial resources.

2 How much do I need?

To determine how much you need, Registered Financial Consultants have a rule of thumb. Most people would require about 70% - 90% of their final average income. Suppose you plan to retire at age 55 and your income were as follow:

Age 53 - Income 80,000 pa
Age 54 - Income 100,000 pa
Age 55 - Income 120,000 pa
Total Income 300,000

Therefore, the final average income would be 300,000 divide by 3 thus giving us 100,000. Let say, we require 80% of the 100,000 resulting in a post retirement income need of 80,000 per annum.

Another way to estimate how much you will need at retirement is to use the Expense Method. Using your budget as a starting point, list down those expenses that would continue through retirement. Also write down those expenses that would reduced at retirement such as petrol, clothing and also those expenses that would increase at retirement such as medical, utilities such as electricity and water.

3 Where am I today?

List down the sources of retirement income available for you and your spouse. The main sources of retirement income are EPF, pension, retirement accounts, life insurance proceeds and personal investments.

The amount of contributions to EPF is stipulated by law and thus quite fixed. However there are opportunities under retirement accounts and personal investments where you can exercise flexibility to optimise your returns. Notice that I did not say increase your returns but to optimise your returns. Typically, retirement income is serious money and you do not want to take high risk to increase your returns.

The investment vehicles used should commensurate with your risk appetite and time horizon.

4 Would my savings be sufficient for my retirement.

I heard that the longest living person in the world live up to age 121. If that is true, she must be in serious financial trouble. Imagine you worked from 25 years to 55 years, a total of 30 working years, and you spend from 56 years to 121 years, a total of 65 years. Her money would probably be depleted before she departed.

To address the issue of whether your savings would be sufficient, there are two methods of funding retirement income. One method is principal intact, where you will receive perpetual income from interests or dividends. The other method is liquidating principal, where the retirement income is funded by using the returns and a portion of the principal. In this method, you have to understand the typical Malaysian mortality rate and your family tree mortality. Usually, financial planners would add in an additional ten years as safety margin.

5 How much more should I be saving?

The difference between how much your sources of retirement funding would provide and how much you need to fund your retirement consumption would result in what financial planners called the retirement income gap.

It is this gap that determines how much more should you be saving. If the saving capacity is limited, you can look at optimising returns or even deferring your retirement age.

6 What are the options available for me to reduce the retirement income gap?

Increasing your investment returns by 1 to 2 percent can make a significant difference to your wealth. You have to ask yourself some honest questions.

  • Can I take risk?

  • What level of risks am I comfortable to deal with?

  • Do I have the necessary investment knowledge?

  • What are the investment vehicles that I am familiar?

  • What investment strategies are suitable for me?

Once you have answered those questions, appropriate asset allocation would enhance your overall returns in a given period of time.

The important point to consider when optimising your return is to take into account of inflation rate. For example, if the inflation rate is 3% and your return is 4%, in effect you are having an inflation adjusted return of merely 1%.

If you find any difficulty, do not hesistate to consult a Registered Financial Consultant (RFC). You will be surprised that there are many ways of enhancing portfolio returns.

7 When is the best time to save for retirement

In our financial practice, we used the Rule of 2020. Twenty percent of your payroll and twenty years before your retirement. Remember, wealth accumulation is a function of time. The more time you have, you will get the magic of compounding interest to work for you. The advantage of long term compounding can significantly reduce the amount you need to save towards your retirement goals with your investment portfolio. So, start early in planning for your retirement.

8 What if there is still a retirement income shortfall?

By employing various strategies and examining the possibilities, we can make adjustments to our overall retirement plan.

  • Increasing your savings rate
    You can look at the possibilities of cutting unnecessary expenses and contribute the difference to savings for your retirement.

  • Increasing your investment return
    Explore various other alternative investments that can help you to optimise your returns. For example, instead of putting your money in Fixed Deposit, you should consider putting some in Capital Guaranteed Account or even Managed Fund.

  • Defer retirement
    Instead of retiring at age 55, defer your retirement to say age 60, would provide you the room and time to achieve a significant retirement egg nest.

  • Relocation
    By relocating your residence, from say Kuala Lumpur to Rawang, would help you to retire at a much lower costs. With your retirement sources in place, a lower costs destination would expend your retirement consumption over a longer period of time significantly.

  • Taking a part time job at retirement
    Having an income from part time job would definitely help you to reduce the shortfall. You may perhaps want to use those experiences you have acquired over the years to put it to good use. You could do some tuition, advisory or consultancy works. Explore your options.

  • Reassess your retirement needs
    Perhaps you don’t have to take two overseas holidays. You can reduce it to one overseas and one domestic. Maybe you don’t have to drive the current model at retirement. You can drive a less expensive model. You can choose to live on less throughout your retirement.

9 Post-retirement planning

  • What does a comfortable retirement meant to you?

  • What do you plan to do at retirement?

  • Do you want to have good health to enable you to do what you want to do?

  • Do you have a health plan?

  • What are your hobbies?

  • How are you going to spend your time?

Besides, the financial needs at retirement, take a hard look at the non-economic aspects of retirement. If you plan to have good health, you certainly need a health plan now. Maybe taking up tai-chi or joining a fitness centre is a step in the right direction. What about your nutritional needs? Would you play more golf or travel more? What would you be doing in between the periods?


If proper planning is done, retirement is certainly something you can look forward to with anticipation. A comfortable retirement is within your means, if you develop a financial plan to reach those goals. Do not procrastinate. Take action today.

Jeffrey Chiew Kim Chwee

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