Why It’s Time To Start Saving For Your Retirement Fund!

Many of us never think about retirement until we are in our 40s and 50s. But this is something that YOU should really start thinking about once you start working.

You will be SHOCKED by how much money you actually need to retire comfortably. So start saving up NOW, or learn to live with a lot less after you retire!

Retirement - How Much Do We REALLY Need To Retire?

 

EVERYONE Needs A Retirement Fund

There will come a time when we are unable or unwilling to work… and to prepare for that eventuality, we all need a retirement fund of some sort.

Whether that’s through a retirement plan, a pension fund, or a personal investment and savings – it doesn’t matter.

What matters is HOW MUCH you need to save up, BEFORE you can safely retire.

 

How Much Do You Need To Retire?

Let’s say you are 40 years old and your family needs RM 5,000 a month right now to live comfortably.

Based on a retirement age of 60 years, we came up with these figures on how much you will need :

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 2,006,790 RM 2,987,895 RM 4,682,290
90 Years RM 2,902,679 RM 4,809,783 RM 9,184,494
100 Years RM 3,736,782 RM 6,919,336 RM 17,688,651

Shocking, isn’t it? How many of you expected that you would need RM 2 million to RM 3 million for retirement???

Note that we based those estimates on our own Excel-based calculations, and not using a retirement planning system.

But they should give you a good idea of how much you actually need… and I have to say, I was pretty shocked by the figures myself.

OMG

 

How Much You Need To SAVE To Achieve Those Retirement Targets

Now that you have an idea of how much you need in your retirement fund, you should use it to calculate how much you need to save EVERY YEAR from now until your retirement age.

Assuming you are 40 years old, and you will retire at the age of 60, this is how much you need to save :

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 100,340 per year
RM 8,362 per month
RM 149,395 per year
RM 12,450 per month
RM 234,115 per year
RM 19,510 per month
90 Years RM 145,134 per year
RM 12,095 per month
RM 240,489 per year
RM 20,041 per month
RM 459,225 per year
RM 38,269 per month
100 Years RM 186,839 per year
RM 15,570 per month
RM 345,967 per year
RM 28,831 per month
RM 884,433 per year
RM 73,703 per month

Now those are ROUGH figures that do NOT include adjustments for inflation, or dividend from your investments or interest from fixed deposits.

But it will give you an idea of the enormity of the task at hand!

Recommended : How To Calculate The Retirement Fund You NEED!

 

Why Inflation Matters.. A LOT

Inflation increases how much MORE money you need per month, just to maintain the same standard of living.

Let’s say your family needs RM 5,000 a month to survive.  This table show you how much MORE you will need to maintain the same living standards, in steps of 10 years.

Age 3% Inflation 4% Inflation 5% Inflation
40 Years 5,000 5,000 5,000
50 Years 6,720 7,401 8,144
60 Years 9,031 10,956 13,266
70 Years 12,136 16,217 21,610
80 Years 16,310 24,005 35,200
90 Years 21,920 35,533 57,337

More importantly, even a small 1% increase in inflation can make A TON of difference in how much money you need.

After 40 years, the difference between 4% and 5% of inflation is RM 11,195 per month!

 

OMG! These Retirement Figures Are CRAZY! What Can I Do?!

Okay, those retirement figures are CRAZY… and sobering. So you cannot possibly save RM 150,000 per year.

There are a few solutions to this problem :

  • Plan For A Smaller Pension
  • Save Early
  • Retire Later
  • Invest Your Savings

Thinking of solutions

We ran some numbers for 4% inflation, and here is a summary of the four options above :

Retirement Fund Size

Life Expectancy Baseline 30% Smaller
Pension
Save
10 Years Early
Retire
10 Years Later
6%
Investment Return
80 Years RM 2,987,895 RM 2,091,527 RM 2,987,895 RM 2,070,254 RM 1,878,106
90 Years RM 4,809,783 RM 3,366,848 RM 4,809,783 RM 4,422,815 RM 2,465,014
100 Years RM 6,919,336 RM 4,843,535 RM 6,919,336 RM 7,119,654 RM 2,921,498
  • The best option is to strengthen your retirement fund with passive income from investments.
  • Reducing your expenditure by 30% is the next best way to keep your retirement requirements low over the years.
  • Retiring 10 years later is also as effective as reducing your pension by 30%, because it shaves 10 years off using your retirement fund.
  • Saving early does not reduce your retirement fund size, but as you will later see, it will make it much EASIER to reach your retirement goal.

How Much You Need To Save

Life Expectancy Baseline 30% Smaller
Pension
Save
10 Years Early
Retire
10 Years Later
6%
Investment Return
80 Years RM 12,450 RM 8,715 RM 8,230 RM 5,571 RM 7,825
90 Years RM 20,041 RM 14,029 RM 13,361 RM 12,286 RM 10,271
100 Years RM 28,831 RM 20,181 RM 19,220 RM 19,777 RM 12,173
  • Again, strengthening your retirement fund with passive income from investments is the best option.
  • Retiring 10 years later can reduce your need to save up by 50%.
  • Interestingly, saving 10 years early takes as much effort as cutting down your pension by 30%
  • In other words, if you can start saving 10 years early, you can enjoy a “full” pension equivalent to RM 5,000 today, rather than just RM 3,500.

Retirement Is Coming

 

How To Save Up For Your Retirement In Detail

Option A : Plan For A Smaller Pension

You need to reassess what you NEED for retirement. Can you lower your expenditure and still live a good life?

Let’s say you can get by with just RM 3,500 per month, instead of RM 5,000 per month. This is what your retirement requirements will look like :

Retirement Fund Size

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 1,404,753 RM 2,091,527 RM 3,277,603
90 Years RM 2,031,875 RM 3,366,848 RM 6,429,146
100 Years RM 2,615,747 RM 4,843,535 RM 12,382,056

How Much You Need To Save

Assuming you are 40 years old right now, and will retire at 60 years of age :

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 70,238 per year
RM 5,853 per month
RM 104,576 per year
RM 8,715 per month
RM 163,880 per year
RM 13,657 per month
90 Years RM 101,594 per year
RM 8,466 per month
RM 168,342 per year
RM 14,029 per month
RM 321,457 per year
RM 26,788 per month
100 Years RM 130,787 per year
RM 10,899 per month
RM 242,177 per year
RM 20,181 per month
RM 619,103 per year
RM 51,592 per month

Now, this is definitely more doable, isn’t it? Cutting down your monthly pension by 30% automatically cuts your retirement requirements by 30% across the board.

Option B : Start Saving Early

Let’s say you started saving up for your retirement 10 years EARLIER, and you are 40 today.

10 years ago, you would be able to make do with just RM 3,720 – for the same cost of living as RM 5,000 today.

Retirement Fund Size

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 2,006,790 RM 2,987,895 RM 4,682,290
90 Years RM 2,902,679 RM 4,809,783 RM 9,184,492
100 Years RM 3,736,782 RM 6,919,336 RM 17,688,651

How Much You Need To Save

Assuming you started saving at 30 years of age, and will retire at 60 years of age :

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 66,893 per year
RM 5,574 per month
RM 99,597 per year
RM 8,230 per month
RM 156,076 per year
RM 13,006 per month
90 Years RM 96,756 per year
RM 8,063 per month
RM 160,326 per year
RM 13,361 per month
RM 306,150 per year
RM 25,512 per month
100 Years RM 124,559 per year
RM 10,380 per month
RM 230,645 per year
RM 19,220 per month
RM 589,622 per year
RM 49,135 per month

Option C : Retire Later

Let’s say you delay your retirement by 10 years. It would buy you time to build up your retirement fund, and delay withdrawing from it.

Retirement Fund Size

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 1,400,344 RM 2,070,254 RM 3,087,102
90 Years RM 2,696,958 RM 4,422,815 RM 7,626,957
100 Years RM 3,900,958 RM 7,119,654 RM 14,960,570

How Much You Need To Save

Assuming you are 40 years old right now, and will retire at 70 years of age :

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 46,678 per year
RM 3,890 per month
RM 69,008 per year
RM 5,751 per month
RM 102,903 per year
RM 8,575 per month
90 Years RM 89,899 per year
RM 7,492 per month
RM 147,427 per year
RM 12,286 per month
RM 254,232 per year
RM 21,186 per month 
100 Years RM 130,032 per year
RM 10,836 per month
RM 237,322 per year
RM 19,777 per month
RM 498,685 per year
RM 41,557 per month

Option D : Invest Your Savings

Let’s say you invest your savings in property, stocks or other investment plans that generate a yield of 6% per annum.

This would allow you to “beat” inflation, and use the power of compounding interest (dividend or passive income in this case) to boost your retirement fund!

Retirement Fund Size

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 1,354,583 RM 1,878,106 RM 2,653,298
90 Years RM 1,711,053 RM 2,465,014 RM 3,673,797
100 Years RM 1,970,303 RM 2,921,498 RM 4,548,510

How Much You Need To Save

Assuming you are 40 years old right now, and will retire at 60 years of age :

Life Expectancy 3% Inflation 4% Inflation 5% Inflation
80 Years RM 67,729 per year
RM 5,644 per month
RM 93,905 per year
RM 7,825 per month
RM 132,665 per year
RM 11,055 per month
90 Years RM 85,553 per year
RM 7,129 per month
RM 123,251 per year
RM 10,271 per month
RM 183,690 per year
RM 15,307 per month
100 Years RM 98,515 per year
RM 8,210 per month
RM 146,075 per year
RM 12,173 per month
RM 227,426 per year
RM 18,952 per month

 

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