After working for many years, it is finally time to retire. But do you have enough assets? Can you afford to retire?
No one plans to be poor in retirement, but many do end up in poverty or could not stop working. What went wrong? They fail to plan.
Retirement need
The data from Employees Provident Fund (EPF) show that about 35% of its members aged 54 have less than RM 10,000 in their savings (Link). However, the current basic threshold for retirement savings is RM240,000. Can this amount last for 20 years as per the projection of EPF? I highly doubt it. Thus, EPF has proposed that individuals who are retiring in 20 to 30 years will need to have savings of at least RM900,000 to RM1 million (Link). So, how much is enough for retirement?
The retirement need is the amount of money that has to be available on retirement. There are formulae to estimate the required amount, and it also depends on whether you want to use up all your money or want to leave some to your descendants. In short, it is an individualised figure. However, we can use the figures from EPF as a guide.
Retirement resources
Retirement resources are assets earmarked for retirement. These assets are accumulated during working years and will be used to support your lifestyle in retirement. If you do not have enough retirement resources, it means you will likely be unable to retire. Thus, it is important to take stock of your retirement resources and take action to increase these assets before retirement.
Retirement gap
Retirement gap is the fund deficiency at retirement. It is the difference between your retirement need and retirement resources. We will estimate the projected value of your retirement resources and minus the amount from your retirement need. If you have a deficit, this is your retirement gap that you will have to fill before retiring. On the other hand, if you have a surplus, you have no retirement gap and you should be able to retire comfortably. However, even if you have a surplus, it does not mean that your situation would not change. Thus, it is important to do a review from time to time.
Steps in retirement planning
1. Setting retirement goals and objectives.
2. Gathering data relating to retirement planning.
3. Analysing data to determine situations and retirement needs..
4. Designing and recommending a retirement plan.
5. Implementing the plan.
6. Monitoring performance and reviewing the retirement plan.
Conclusion
Retirement planning is closely related to investment planning. To accumulate the retirement fund, it is necessary to invest your money. By putting your money in savings account or even fixed deposits, it would not suffice, unless you have a large lump sum to begin with. But even so, inflation would reduce your purchasing power sooner or later.
To transit to a comfortable retirement, it is important to have a plan and take action as early as possible. If you still have not planned for retirement yet, it is high time to start now. Better late than never.
How can a financial planner help you?
I will help you to determine your retirement need with your inputs. After that, we will find out your assets that could function as your retirement resources. If there is a retirement gap, I will recommend some ways to bridge the gap. If there is a retirement surplus, you have done well but you still have to review your situation once in a while.
In both situations, I will devise a retirement plan for you, taking into consideration all your preferences and concerns. I will help you to monitor your progress and suggest adjustments to your plan when required. If you could not follow the plan or have some changes in your life, feel free to reach out to modify the plan.
If you are interested in working with me to plan for your retirement, just leave your details by clicking the button below. I will reach out to you and see if we would be a good fit for each other.
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Disclaimer: This post is for informational purpose only. You should use judgment and conduct due diligence before taking any action or implementing any plan suggested or recommended in this article.
