ONLY 5% of Malaysians are prepared for retirement. Despite a growing awareness for the need to prepare for one’s retirement, many do not translate their plans into action.
Those in their 20s think they are too young to think about retirement, while those in their 30s and 40s tend to believe they are doing enough because they have their EPF savings. By the time they are 55, it is just too late.
The sad truth is that at 55, most people cannot retire with financial security. Based on EPF’s 2005 annual report, about 90% of EPF contributors have less than RM100,000 in their accounts – not enough to see them through 20 years past retirement
With people living longer, marrying and having children later and not saving enough, facing retirement is a challenge. While there is growing awareness about the need to plan, less than 5% are prepared for retirement and fail to take into consideration inflation rates and rising medical costs.
It is a fact that wages have not moved in tandem with the rise of the cost of living and inflation. That trend is expected to continue.
And if people do not start planning early for their retirement, they are going to find themselves in a spot after they turn 55.
Today, three meals cost you RM20 but in 20 years time – with an inflation rate of 6% a year – you will need RM64 per day for the three meals, estimates financial consultant Hazel Ong Archibald of CIMB Wealth Advisors (see Chart 1). The government puts inflation rate at 3.2% to 4.8% but Ong says in urban areas, that figure is about 6%. So while the RM500,000 in your EPF or bank account at retirement might look good on paper, she says, if you do not invest that money to make it grow at a rate higher than the inflation rate, 20 years later, it would be worth only RM145,053 in purchasing power!
And even if one has a life policy as well as savings from the EPF, people should still worry about retirement. This is because without a new source of income, that money would run out. This is especially so if one runs into health problems which is common when people grow older.
So are you prepared for your retirement? If not what are you going to do about it? Do you have a residual income flowing into your life so that when you retire, your income will continue to flow in. If you have that is good. If you don't, check it out and see how you can add additional stream of income into your life that will keep on flowing right even after you have retired. Plan now before it is too late!
Check it out at Residual Income Forever. Your retirement may just be something that you may want to do even before your retirement age.
