For someone in their 20s or 30s, retirement might seem so far away that it doesn’t make sense to even think about it now. In reality, it is never too early to start planning for your retirement.

We must remember that life doesn’t always go the way we want it to, we cannot foresee what we’ll be doing at age 50 or what our financial situation will be like.

The best way to reduce the likelihood of having to work well past our intended retirement age is to start planning now!

Our Life Expectancy is Increasing

Good news! We are living longer lives on average; it is now a lot more common to meet someone in their 80s than it was 50 years ago. However, that also means 70% of Malaysians are outliving their retirement savings.

Since we’ll be hanging around longer, we’ll need a bit more money to be able to live comfortably post-retirement.

Starting early means we have more time to save enough for our entire lifespan.

Our Bodies Have Limits

As much as we’d love our bodies to be strong and capable forever, the truth is, we will physically or mentally slow down eventually. We do not know when this day will come and may well be able to perform consistently into our 60s or 70s, but it’s equally possible that we start declining before our planned retirement age.

We can’t work forever, and we won’t have to if we take the initiative to plan for retirement early. 

Medical Emergencies

This is an ugly truth most people do not like thinking about, but we must acknowledge that as we age, medical problems may become more common.

Insurance does not necessarily cover all kinds of ailments, which is why having a fund for health emergencies is vital. We have limited control over our health, but we can always be prepared for a rainy day, provided we start now.

Check Off Your Bucket List

On a more positive note, post-retirement is the best time for you to try things you’ve always wanted to. Most people dream of travelling the world once they cut that retirement cake, so don’t let a lack of planning delay your life-changing journey around the globe.

Retirement shouldn’t just be about not working and retreating to a quiet, unassuming life (unless that’s what you want,) it should also be the time you live life to the fullest and experience things you weren’t able to during your career, and for that to happen, you need savings!

Family Dependence

Nuclear families are becoming more of the norm, children are leaving home more to find job opportunities or build their own families. With the rising cost of living, it may not be fair to depend on family members for monetary support.

An efficient retirement plan not only allows you to live out your golden years in comfort, but also eases the burden on your immediate family members. In fact, with extra money, you may even chip in and contribute towards your grandchildren’s education! 

How Do I Effectively Plan for Retirement? 

• Estimate Retirement Spending Needs 

“How much money would I need to live comfortably for the rest of my life after retirement?”

Ask yourself this question and try to find out the answer, take into account your daily necessities, make room for emergency fundings, unpaid mortgages, any expensive hobbies or experiences you hope to try out, and inflation. You may find that the expected spending amount is around the same as you spend now if not more, since you have more free time to splurge. 

• Start Early to Take Advantage of Compounding

Compounding is when the money you earn from investments is reinvested to try and earn even more. The earlier you start, the more opportunities you give your investments to compound.

You don’t need a huge amount of money to reap the benefits of compounding as the minimum investment is only a few hundred ringgit. Over the period of a few decades you easily stand to grow your savings into the thousands. 

• Diversify Investments

While EPF is useful, it helps a lot more if you can also draw from private retirement schemes and other assets. In our 20s or 30s, we can take more calculated risks and engage in stock trading or long-term investments to build up our portfolio.

As we move closer to retirement age, we can switch over to more conservative investments with guaranteed returns. 

• Be Mindful of Health

As stated before, remember to keep your health in mind when planning your retirement funds. This is very important as a hospital bill can easily derail all your post-retirement plans.

We’re not just talking about major surgeries or long-term hospitalisations, but also increased visits to the dentist, and for hearing or visual aids. Research and invest in an insurance plan that is not only limited to accidents. 

It is time to stop putting off planning for retirement any further. As we can see from the current climate across the world, unpredictable things can happen in life, it is essential that we are prepared for it, especially when we reach an age when working full-time might not be an option anymore.