PETALING JAYA: Amidst rising living costs, financial planners urge Malaysians to start planning for retirement as early as in their 20s.
Inflation, they say, is only part of the challenge with the other being an over reliance on Employees Provident Fund (EPF) and bank savings.
Financial literacy advocate Amy Seok said those in their 20s should start building consistent saving habits, even if the amounts are small.
“Building emergency savings and setting aside at least 10% to 15% of income into long-term investments creates a strong foundation.
“For those in their 30s, commitment increases due to housing, children and rising expenses.
“Formalising a retirement plan is crucial while also increasing saving to at least 20% while diversifying investments,” she said when contacted.
Those in their 40s should review their retirement targets and rebalance their portfolios.
“Reduce unnecessary debt and plan for children’s education separately, so that retirement funds are not compromised,” Seok said.
Those in their 50s, meanwhile, should focus on capital preservation and not just growth.
“Assess whether accumulated savings can generate sustainable income for the next 20 to 30 years.
“Downsizing expenses, planning passive income streams and making healthcare protection a priority are essential,” she said.
Among financial blindspots, Seok said, include an over reliance on EPF savings and underestimating healthcare costs.
“This should be complemented with measures like voluntary EPF contributions.
“Medical inflation too is rising rapidly, hence the need to secure comprehensive medical coverage early and planning a separate fund for healthcare in retirement.”
A recent survey showed that only 58% of Malaysians believe they have enough to retire.
In a separate survey, only 44% of respondents said they feel prepared for retirement but confidence in long-term financial planning continues to decline.
Licensed investment manager, adviser and financial planner Danny Wong said even those in their 30s would face financial issues by the time they turn 60 if they do not plan from now.
He advised splitting savings for different purposes such as retirement, contingency, lifestyle and legacy.
“For many older Malaysians, bank savings have been the cornerstone of financial security.
“While it does provide stability and liquidity, it can also be vulnerable to inflation in the long run,” said Wong.
He said Malaysians should consider investment instruments that offer long-term capital growth as it can better ride out market volatility and reap benefits of compounding interests.
Wong said Malaysians should aim to save between 15% and 25% of their salaries for retirement.
“Saving below 15% could mean retirement savings struggle to keep pace with inflation, rising healthcare costs and longer life expectancy.
“Over time, this creates a shortfall even if someone has EPF savings,” he said, adding that savings closer to between 20% and 25% possibly gives greater peace of mind and better preparedness for the future.
