The EPF has suggested a targeted minimum of RM240,000 to fund a person’s retirement from age 55 to 75. This, however, only offers them RM1,000 a month for 20 years – an unrealistic figure that assumes no major spikes in inflation, no further devaluation of the ringgit, and no unforeseen health costs.
More realistically, Bank Negara suggested aiming for RM2,700 a month per person, or about RM500,000, to fund retirement.
Worst-case scenario, you may not be healthy or even live long enough to enjoy your golden years. Best-case scenario, retirement might not be as enjoyable or affordable as you imagined.
So, what can you do to beat the system? Here are six actionable steps that will give you a better chance at retiring earlier, with more money in your retirement fund.
1. Financial literacy
Basic financial literacy is still not part of most curricula. But it’s never too late to build a solid foundation by understanding the differences between good and bad debt, how credit is assessed for loans and mortgages, how credit cards work, the power of compound interest, and basic investment strategies.
Start reading and learning more about how to better handle your personal finances.
2. Budgeting
Living within your means is another valuable concept for building and supporting a healthy financial lifestyle. Learning how to budget, which means honing the ability to separate your needs from your wants, will help curb unnecessary spending.
3. Saving
Setting aside savings from every paycheck before allocating amounts for your monthly expenditure is good practice that will prioritise and enforce your commitment to your retirement fund.
Treat your savings as an expense and learn to “pay” it first, not last, to put you on a financially sound path.
4. Investing
Consistently saving and investing are key elements to retiring early, although diversifying your funds towards a mix of assets and investments that offer a range of returns will depend on your risk tolerance.
It’s safer to minimise exposure to high-risk investments, even if this requires more patience and commitment for you to see results. Even simply maximising your EPF contributions will allow your money to grow passively.
5. Upskilling
Advancing your skill sets puts you in a better position to ask for a raise more often, or seek better pay with a different organisation.
6. Increasing the value of time
By becoming better at what you do, you save time by completing your work faster. With more free time comes the opportunity to add other streams of income.
Whether you join the gig economy, get a part-time job, or start a business, utilising your extra time efficiently allows you to trade it for more money, savings, and investments.
As your skill sets improve and your earnings and/or income streams grow, you’ll have more investable funds to help you build a nest egg more quickly, which will hopefully lead to a comfortable early retirement.