Plan For Your Retirement

A recent global survey showed that 88% of pre-retirees in Malaysia stated they are worried about not having enough money to live on day-to-day at retirement and that goes to show how unprepared some of us are. Common mistakes that result in this potentially high misstep rate and what you can do to avoid becoming part of the statistics.

Retirement planning mistake #1: No plan

You can’t get to where you want to go if you don’t even know where the destination is.  If you have not already set specific measurable financial objectives and implement a step-by-step plan to achieve them, then you are setting yourself up for disappointment.

 

Retirement planning mistake #2: Not saving enough

Nobody likes to be told to save more. A few inconsequential inconveniences today can compound over time into a comfortable retirement tomorrow. Rule of thumb is to set aside about one-third (33%) of your salary for retirement. Your EPF contribution (employer and employee contributions) should give you at least 23% while the remainder 10% can be self-contribution to investments such as the Private Retirement Scheme (PRS).

 

Retirement planning mistake #3: Don’t start saving early enough

People make the mistake of believing they have plenty of time to plan for retirement once they buy a home, build a family and put children through university and so on. The longer you delay getting started, the harder it will be and the greater risk to your future retirement. The longer you wait, the harder it gets because there is less time to compound your way to wealth.

 

Retirement planning mistake #4: Inaccurate retirement income assumption

How much income do you need to maintain your current lifestyle in retirement? The rule of thumb is to figure that you will need about two-third (67%) of your last drawn salary as income in retirement.
 

Retirement planning mistake #5: Disregarding higher healthcare costs

One of the most overlooked areas of retirement planning is estimating what healthcare costs could be in retirement and including this in the calculation of income needs. Healthcare cost is a huge expenditure to plan for on top of normal living expenses. If you are sick or injured you need treatment.
 

In Malaysia, medical cost is increasing at the rate of between 10% and 15% every year and treatments of diseases and injuries that are usually inflicted on elderly patients don’t come cheap. So, having adequate reserves and a good medical coverage can be the difference between a comfortable retirement and one filled with challenges. Don’t wait till you are sick to get medical insurance coverage. It is also cheaper to get medical insurance at an early age.
 

Retirement planning mistake #6: No long-term care plan.

As life expectancy increases, Malaysians will likely be needing a stretched out period of long-term nursing care at the last stage of their lives. To avoid burdening family members with the hassle of caring for them, set aside additional provision for care facilities that can include nursing home, home care, dementia care and hospice care which can cost between RM1,000 and RM5,000 a month.
 

Retirement planning mistake #7: Not updating your retirement plan

As you journey through life to retirement, you will experience different events in different stages of your life be it in your 20s, 30s, 40s or 50s. These life events will impact your income and expenses, so it is imperative that your retirement plan is revisited every few years to take this into account. You should revisit your plan every three to five years, or as your life changes with a marriage or children, so adjustments can be made accordingly. By making these adjustments often, you’ll stay on track for a better retirement.
 

Conclusion

There are three things you can’t avoid in life – taxes, death and retirement. Hence, getting educated and securing your retirement plan is not an option. You are betting a lifetime of work and savings with every decision you make so hopefully learning these retirement planning mistakes can help you to avoid missteps and able you to navigate these waters effectively and with confidence.