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Managing your money after retirement


Your lifestyle determines the amount of money needed to live comfortably after retirement.

How much should an average Malaysian have to survive comfortably after retirement?

Private Pension Administrator chief executive officer Datuk Steve Ong says the amount of money needed depends on the kind of lifestyle that a retiree is accustomed to during employment.

Retirees must be able to stretch their savings for at least 20 years, says Datuk Steve Ong.
Retirees must be able to stretch their savings for at least 20 years, says Datuk Steve Ong.

“The rule of thumb is to ensure that you have a 2/3 replacement income ratio of your last drawn salary to continue enjoying your current standard of living upon retirement. To put it simply, if a person is drawing a monthly salary of RM6,000 prior to retirement, he will need about RM4,000 as his monthly retirement income to enjoy the same quality of life which he has been used to.”

To attain the 2/3 replacement income ratio, PPA has done its research and estimates the public will need to set aside at least 1/3 of their current monthly pay as retirement fund.

“While 1/3 or 33% may seem like a lot, do take heed that most Malaysians are already saving at least 23% a month for EPF (11% employee contribution and at least 12% employer contribution). As such, the gap we need to address is 10%. The public can now contribute to the Private Retirement Scheme (PRS), a voluntary long-term savings and investment scheme designed to help Malaysians accumulate savings for retirement,” explains Ong.

PRS seeks to enhance choices available for Malaysians, employed or self-employed, to voluntarily supplement their retirement savings under a well-regulated retirement scheme. PRS is also made affordable as the public can contribute to the retirement scheme for as little as RM100. Fees and charges are kept low to encourage participation from the general public.

Ong adds that retirees need to ensure the retirement income is inflation adjusted and that money continues to grow even at retirement.

“During retirement years (also known as decumulation phase), retirees must be able to manage their money to stretch their savings for at least 20 years. Invest a certain portion of your savings, set the limit for monthly withdrawals and keep aside sufficient funds for your expenditure. This will ensure your money continues to work hard for you as you spend on only necessary things post-retirement.”

Meanwhile, the Employees Provident Fund (EPF) has introduced its Retirement Advisory Service (RAS) at the EPF’s main branches at Jalan Raja Laut, Kuala Lumpur, and Jalan Gasing, Petaling Jaya. Launched in July, RAS offers free advice and guidance to members on how to make vital decisions about EPF savings and make their money last throughout their golden years.

“It is part of EPF’s long-term plans to help members achieve a sustainable retirement. It is especially meaningful for members who are nearing retirement age or who have already retired but still have savings in the EPF. Some members face a challenge in managing their retirement funds and as their retirement savings custodian, we need to ensure members can achieve a reasonable level of comfort after they leave the workforce. RAS will help members make informed decisions on the use of their retirement savings pre- or post-retirement,” says an EPF spokesman who advises members to start financial planning for their retirement early and not to depend solely on their EPF savings.

So far, over 2,000 members have sought the advice of RAS. The service has received positive response from members who are briefed on EPF products such as the Flexi Withdrawal scheme which allows retirees to manage their savings via flexible withdrawal options.

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