Since my first blog talked about health, my second blog should start with wealth. Don’t worry! Although I am not a certified financial planner, but I think I know a little bit more than some of them who only know how to advice you to buy insurance anyway (PS: Although I sell insurance before, I am not an insurance agent, so do take my advice, haha!). Let’s just quickly go through some statistics, around 70% of retirees used up their employees provident fund (EPF will be used below) in less than 10 years after they retired. What is more, around two thirds of Malaysian employees have less than 50,000 in their EPF account. According to Star Newspaper and EPF, EPF announced a new target of RM240,000 for basic savings in January 2019. So, what does this mean for normal employees, let’s just deep dive into this topic about retirement.
First, it means your savings are not enough. Obvious, yet ignored by so many. If the EPF think that your savings are enough, they would not have revised the basic savings upward. So, you should better be thinking about retirement. Currently, EPF revised this target by assuming each retiree will only use around RM1000 per month after they retired at the age of 55 (although the government already revised the retirement age to 60, rather confusing).
Oh my god!!! Are you serious? RM1000 per month after 20 years and discounting inflation rate. What will the RM1000 look like? Monopoly money? And do you even know what is inflation? To put it simple, inflation is like a monster that eat up your currency. Your currency is decreasing in value every second when the government print more money (going to print RM600 billion more).
Second, the revised target is based on the average lifespan of 75 years old. Well, I feel awkward!!! My grandmother is already 93 years old and still strong. I heard many uncles and aunties are already over 75 years old. Using Department of Statistics Malaysia (DOS) data, up to 7.2% of the Malaysian population are 65 years old and greater. By 2040, it is predicted to be 14.5%. Which let me to think, even we are really thrifty and only use the RM1000 per month, we will not survive once we reach 75 years old (not to mention after taking account of inflation for the next 20 years and the compounding effect of inflation). We will have to come out and find a job or find a piece of land (which is also not free).
Third, the RM1000 has not include the medical expenses that you may encounter during your golden years. Even you have personal savings, the medical inflation is 12 per cent per year. So, both epf and personal savings will not help. Maybe you can depend on your child? What if you are single and don’t have any? What if your children cannot make ends meet? So, there’s a lot to think about. Again, showing that savings are not enough.
Maybe we really need to get serious in planning for our retirement. Off I go thinking about retirement now, so will write some other blog next time.
Source:
- https://www.thestar.com.my/business/business-news/2020/11/21/the-epf-dilemma
- https://www.kwsp.gov.my/-/epf-sets-new-target-of-rm240-000-for-basic-savings
- https://cutt.ly/hvPcJok
- https://cutt.ly/RvPcVom
- https://www.nst.com.my/lifestyle/heal/2019/10/530574/lowdown-medical-and-health-insurancetakaful