Can you retire with just RM900,000? This was one of the keyword search which one of the reader to kopiandproperty.com entered. How unusual. Is RM900,000 a lot of money after we have deducted the inflation depreciation to it? Assuming we are 56 today and tomorrow we retires, with RM900,000 in cash. Can we survive the remaining of our productive years? Let’s assume we live until 81 years old. That’s 25 years away. In months it is 25 x 12 = 300 months. RM900,000 divided by 300 months = RM3,000 per month. Assuming inflation is really low, at 2% per year. Based on simple calculation, your RM3,000 would be just RM1,500. Suddenly it does not seem like a lot right? My mother would tell you it is enough for two persons. My father and she. Why would I agree with her? Well if you have the following done before you retire, then perhaps you are still safe.
Medical Insurance – Better be covered. This is a critical part to preserving your wealth. Imagine just one kidney stone operation every five years, that would have cost you easily 6% of your RM900,000. (RM10,000 per kidney operation). There are many more surgeries which costs many times higher.
Car Loan – Do not tell me that you are buying a new car when you retire? It’s not like you need the car to race against all your other retired friends right. Make sure you get a reliable car though and not one which requires huge maintenance even if it looks great outside and inside.
Housing Loan – Hopefully by the time you retire, you would have repaid your loan in full. Do not overburden yourself once you retire. It’s time to go enjoy etc. Perhaps at this time, REITs may be a better bet.
Credit Card – My father even called the bank to limit his credit limit because he would not be spending so much anyway. Pay them all within the same month. Manage it well. If you have outstanding balance today, maybe you are spending too much.
Luxury – Branded smartphones. Do you need just a smartphone which can do everything you need or you need a smartphone that can make people feel you are successful? If you think this is just little, please be reminded that if you change your smartphone on a yearly basis, from Iphone 4 to 4S to 5S and most probably in a few months time, Iphone 6, you would have spent over 1% of your RM900,000 just within 4 years, on nothing more than just SMARTPHONE.
Holidays – One holiday every quarter is still possible if you go for one by yourself and the other three sponsored by your kids. Yes, I am serious. You should have kids! Teach them well and watch them grow to be great, just like you. My parents love China, that’s pretty okay as it’s cheap. Alternatively, they have no issues to buy Air Asia months ahead and save huge money. Imagine a holiday for two by flights to Kuching, together with stay at Tune Hotel for 2 nights for just RM116. I am not joking, I have done it before. 🙂
Think about it. What’s needed, what’s wanted. Manage your needs, Control your wants. Yes, I think I will manage based on my mother’s way and I think I may just survive the next 25 years after retirement with RM900,000. Now for the hard part, how to get to RM900,000 before I retire. Oh yeah, EPF helps a bit too.
written on 5 June 2014
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