Preparing for retirement

Many of us in welcoming retirement do not plan or think about retirement planning, assumming that EPF savings will be sufficient to support us.  However some had to seek re-employment or rely on their children. To ensure that this does not happen, its important to plan to be financially independent during your golden years.  Retirement planning involves a few steps to determine the required amount, how much you have now and how to match the difference. 

The crucial questions are:

1. When you want to retire?
2. How much do you need during retirement?
3. How long do you need the money?
4. How much is the total fund you need?
5. How much assets you will have upon retirment?
6. How to make up for the difference?
7. What you should do now? 

You need to work out a comprehensive retirement planning taking into account your assets, debts, expenses, savings and other financial goals.  Seek the assistance of a qualified Financial Planner if you find it difficult to do it on your own.

Savings towards your retirement

Saving for retirement is essential. When you save for retirement you are saving for your future. When you neglect retirement you run the risk of not being able to take care of yourself when you are older. Your retirement goals should come before saving for your children’s education or going on vacations. The earlier you start saving the less you will need to put aside each month to reach your retirement savings goals.

The above chart shows what your retirement nest egg will be if you invest RM 15,000 annually with a compound growth of 10% (with a inflation rate of 3.1%) for a period of 35 years.

Retirement Checklist

To achieve a comfortable retirement, early planning is a pre-requisite. Some areas to consider are as follows:

Medical Check Up: go for a comprehensive medical check up before problems arise so that you can be completely up to date on all preventive measures.

Saving & Investing Check Up: Its not how much you earn, but how much you save. Mindful of your expenses in relation to your income to ensure that you have surplus cash each month.

Insurance Needs Check Up: Plan your insurance early. Cost of insurance increases as you go older.

Estate Planing: Ensure proper will and estate planning is done.

Career Check Up: Are you happy and contented with your current job and will continue until retirment age? As you are older, the less employable you are, thus appraise your career.

Relationship Check Up:  Will you spend more time with your family or do you have parents to take care after retirement.  Decide what you want the rest of your life to be about?

Retirement Lifestyle Check Up: What will you do after stop working? Will you enhance your hobbies, welfare activities or travel?
Smart Investor

Greying Malaysia

Says Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan: “There’s a big gap between the age of retirement and when we pass on. This becomes a burden to society and a burden to the Government if we don’t harness the potential of the retirees.”

He adds that as people start families at an increasingly late age, their children are likely to be financially dependent even after the parents’ retirement.

With no more income and little preparation for that eventuality, this this can lead to hardship. Tan of FPAM says: “The reality is that the majority of Malaysians can ill afford retirement.”

Source: http://biz.thestar.com.my/news/story.asp?file=/2010/9/4/business/6960500&sec=business