Most of us work hard all through our adulthood to achieve a peaceful and relaxing retirement but have you ever considered how much retirement money you actually need in order to have a safe and secure post-work life? Factors such as your intended lifestyle, your earning power and healthcare play a big part into retirement and if you have not started to plan it now, you better. Here are some suggestions how.
You are finally here. You have worked hard all your life and now that you are in your 50s’ or 60s’, you can leave it all behind and enjoy the magical golden years of retirement. You can now toss away all the stress, late nights and long commutes for some semblance of peace and relaxation.
But has all the hard work really paid off? With the cost of living rising steadily, are your savings truly enough for you to retire without any worries? According studies by the Employees' Provident Fund (EPF), a majority of Malaysians retire with only an average of RM50,000 in savings, and many of them burn through it quite quickly.
This is an alarming revelation especially to the many would-be retirees who are likely to encounter monetary issues when they are faced with medical needs or other emergencies in the future. Therefore, it is important to not only plan for retirement early, but to plan for it wisely.
Here are some easy steps to help you along the way with your retirement planning to make sure you are well protected.
Save up early
When it comes to savings, you should always keep 10 to 20 percent of your monthly income for retirement. Many of us might think that we can afford to save up for retirement later in our lives, but this causes most people to spend frivolously without thinking about the long term.
Adopting a cautionary approach to your finances by saving early will be something that you will thank yourself in the future when faced with unforeseen circumstances. Essentially, the earlier you start saving, the better. Plus, if you start saving now – it will become a habit and sooner or later you won’t really feel the pinch.
For example, let’s say you are 35 and you have a monthly income of RM3, 500. You should be saving a minimum 10 percent of your income, which works out to be RM350 a month. By the time you hit 60, your retirement savings would exceed RM105, 000, which is double the national average!
Calculate your monthly costs
Every individual leads a different lifestyle that varies in costs and is tailored to his or her own means. For a more systematic retirement experience, you will need to roughly know how much you will be spending each month post retirement especially with long term commitments like housing loans, car loans, insurance, and many others.
You should be looking to reduce such commitments as retirement looms. In fact, the best thing you can do is to avoid any high cost commitments like new long-term loans if you are planning to retire in five- or six-years’ time. With lesser commitments, you will free up your retirement funds for more important priorities like a dream vacation with your loved ones.
Identify some retirement goals
When you retire, a big portion of your savings will no doubt be dedicated to day-to-day expenses. On top of that, you will also need to spend on getting regular checkups and any other debts that have not been settled.
Besides that, some might even want to spend a part of their savings on buying and renovating a new house, fulfilling the Haj pilgrimage, vacations and their children’s education.
As a result, it is important to have retirement goals to keep your spending on track. These goals will help you calculate how much you would need to save up for retirement and keep you in line when you have retired, instead of spending without a care or a plan. That usually leads to an empty bank account pretty quickly!
To work or not to work?
Even though you have retired, after a while, you might find yourself itching to go back to work. You might have your own reasons but according to a study by Merrill Lynch and Age Waved, as many as 7 out of 10 retirees have the desire to continue working despite reaching the retirement age. While the reasons may vary, most admit that it’s to pass time or support mounting living expenses.
The decision is entirely up to you but if you have a skill to offer and the energy to do it, why not? You could explore a variety of post retirement careers like teaching, writing or even consultancy work if you have a niche skillset desired by specific companies.
Health insurance is something that you should definitely consider even at your youth because you just never know what might happen. One thing is for sure though, as you age, you might find yourself visiting the clinic or hospital more often than you did when you were in your 20s. As such, it is even more important to get some health insurance that can protect you well past your retirement age.
According to the Statistics Department, most Malaysians on average live until they about 70 – 80 years old. As such, it is advisable for you to get a health insurance plan that can protect you until you are 80 years old. Make sure the health insurance plan covers critical illnesses and contain unique benefits that can be used during your golden years.
For example, you can check out AIA’s A Plus Health medical card designed to provide you with a complete health solution. It comes with comprehensive medical coverage that protects you against escalating medical costs and is the first to also provide coverage for recovery treatments and medical related equipment. It features a Health Wallet whereby if you don’t make any claims within one year – you’ll get additional benefits like free screening, vaccinations etc.
Another plan you could check out is AIA’s A-EnrichGold savings plan. It’s a short-pay savings plan that provides Takaful coverage and potential growth in investments, allowing you to maximise the return on your money. It offers protection, savings, education, and investment Takaful products as well as investment advisory and wealth management services.
In conclusion, retirement is supposed to be stress free not stressful. If you keep in mind the above tips of proper financial planning, making sound decisions and perhaps some courage to experiment with some post-retirement careers, your golden years will truly be shining indeed.
The above articles are intended for informational purposes only. AIA accepts no responsibility for loss, which may arise from reliance on information contained in the articles.