Is RM1 Million Enough for Retirement in 20 Years?

Is RM1 Million Enough for Retirement in 20 Years?

When do we want to retire?

If we retire at the age of 60, we need to have enough funds to live comfortably for the next 20 years. This is based on typical life expectancy in the future which is quite real. If we like to reduce the number of years from 20, then we just need to work till 65 and we need just funds for 15 years or if we work till 70, then we need funds to be just 10 years. We can definitely live longer but for planning purpose, we should use a number and that’s life expectancy lah. So, what is the age that you want to retire also determines whether RM1 million is enough.

20 years with RM1 million is RM4,167 per month for 20 years.

15 years with RM1 million is RM5,556 per month for 15 years.

10 years with RM1 million is RM8,333 per month for 10 years.

When we see the numbers above, this is also why some are suggesting that we push our retirement to a later age.

Do we ACTUALLY have a fully-paid property?

If we chose to follow some amazing financial planner who told us property investment is totally not needed and asked you to invest into something else, then hopefully that something else is now enough to support your rental of a place to stay for the next 20 years. Hopefully it is for renting a home versus just renting a room. I am sad to see anyone renting a nice place to stay and then when they retire, they have to move into just a small room… Do you know how much is rental going to be if we do not have a property which has been fully-paid for?

20 years with RM1,500 rental (we assume unchanged for 20 years) = RM360,000

The above is super conservative because there is no way that rental will remain unchanged for 20 years. So, please stay focused on just a small property and make it fully-paid when we retire. Then, we can just stay peacefully without the need to worry where to find money to pay rental every month.

Do we have a good-sized EPF savings?

Let’s say we could not hit the RM1 million in savings. What about our EPF savings? EPF is hoping that all members would have at least RM390,000 when they retire. So, could we move towards having this number? If not, please do find more work, get more earnings so that the savings can continue to rise and hit RM390,000 when we retire. If we do have RM390,000 when we retire, this is a great help to the calculations above.

With RM390,000, it will add RM1,625 to the 20 year calculation. It will add RM2,167 to the 15 year calculation and it will add RM3,250 to the calculation for 10 years. Regardless of how many years, this extra money is healthy and will make us feel more comfortable. If we did not have the RM1 million, then at least we can see we do have something from our EPF if we could hit RM390,000 in our EPF.

Strive to earn a comfortable income

Is RM390,000 very hard to achieve for EPF savings? Think about it. Even if we have just an average salary of RM4,000 for 30 years, the contributions from our salary and our employers would already reach the below:

11 percent from employee and 12 percent ent from employer = 23 percent every month. This is RM920 (RM4,000 x 23 percent) every month or RM920 x 30 years (working life) x 12 months = RM331,200.

This amount does not include the dividends from EPF. If we assume it takes 30 years to double, then this RM331,200 will double to RM662,400 by the time we retire.

We just need to ensure we have an average income of RM4,000 for the whole duration of our working life. Hopefully our employers are also very helpful and really do pay the necessary into our EPF savings too.

Do we spend more than we earn?

Truth is, all the above calculations or even preparations are useless if we are spending more than we earn every month. If we are today spending everything and thinking tomorrow can wait, then remember that tomorrow will soon arrive. Strive to drive an affordable car, not something we could ill afford. Strive to go for affordable holidays and not simply spending and then trying to impress everyone in social media.

Strive not to spend the unnecessary versus thinking there is the Buy Now Pay Later schemes. All these BNPL will still come back to haunt us in the future.

Hopefully, everyone who reads kopiandproperty.com understands and will take the right actions. Thank you for helping everyone around us understand that if we say property is not needed, then please set aside enough to pay rental which never ends.

Happy reading!Property News Malaysia? Sign up for daily investment news updates (FREE since Nov 2013 and FOREVER). 

Alternatively, Follow me on Telegram here.

Please LIKE kopiandproperty.com FB page to get daily updates about the property market beyond kopiandproperty.com articles.

Else, follow me on Twitter here.