I know the answer to the title. Most kopiandproperty.com readers will say ‘NO!’ Okay, let’s take a step back. How about we ask what’s the retirement age then? Malaysians should generally live to 75 years old and older in years to come. Earlier article here: When we live longer, better prepare more Thus, if we assume we retire at 65 (already working past typical retirement age), then our savings should need to last us just 10 years. RM200,000 divided into 10 years is equal to RM20,000 per year.
Hopefully when we are 65 years old, we would have fully paid for at least ONE property? In other words, no more rental, no more mortgages. What’s needed now is just food, food and well, occasionally cuti-cuti Malaysia? RM20,000 divided by 12 months is only RM1,667 or RM55 per day. Is this enough today? Actually, without the need to pay for a car or a home, I think RM55 is definitely enough for three meals. For my parents, RM55 is enough for both of them for more than 1 day. Both are retired. They have done enough for their children, have we? Okay, does this then mean RM200,000 is enough for retirement? Let’s look at some numbers.
Article in nst.com.my Statistics say that by 2035, 15 percent of our population will be people of 65 years old or higher. That’s just 15 years away. Ringgitplus Malaysia’s survey last year showed that where savings are concerned, only 25 percent of people save some money every month. From this number, 35% saved less than RM500 per month, 23% saved between RM501 – RM1,000 while 13 percent says they could save between RM1,001 to RM2,000. There are also 9% who said they could save more than RM2,000 every month!
EPF was introduced in 1951 and EPF scheme made it compulsory for employees to contribute 11%of their salaries to the EPF accounts while employers contribute equivalent of 12- 13% depending on the employees’ salary. EPF statistics show that 70 percent of contributors who withdraw funds at 55 often use up their savings within less than 10 years after retiring. EPF’s suggestion is that the minimum savings an EPF contributor should have at age 55 is RM228,000. Main issue is that ONLY 18% of all contributors have that amount by 55. The article is a very comprehensive one. Please do read the Article in nst.com.my
Now let’s look at some potential calculations. My parents spend less than this. Starting with breakfast, roti canai + teh tarik is RM3.50 today. Rice with a vege and a meat plus chinese tea should be RM9 today. Dinner should be a healthy one, perhaps spaghetti (buy a pack, take out some and just boil it for 4 minutes) and a can of curry tuna? Perhaps RM9 today. So, in total RM21.50 today. Assuming this doubles by then (conservatively), then it will be RM43 per day. This is WITHIN the RM55 limit per day when we have RM200,000 divided by 10 years divided by 12 months and divided by 30 days.
It’s thus important to have MORE than just EPF savings. Earlier article here: Low income equals to low savings? Even if we could save RM500 on average for the 30 years that we work and this money just doubled because of returns, it will be as follows: RM500 x 12 (months) x 30 (working years) x 2 (doubled due to interest) = RM360,000. This will be extra money on top of the fully paid property as well as the estimated RM228,000 inside our EPF account. Now at least we are safer… for retirement. Happy working towards this minimum goal.
Next suggested article: Saving enough to invest? Perhaps better to safe enough for investing