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!
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.
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
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.
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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