4 min read    I     Date: 29 December 2022

( In partnership with The Edge )

Most people like to believe that when they retire after a lifelong slog, they will be able to flip the final page of their working life and live happily ever after. But while retirement is a major life milestone, it isn’t the end. You’re merely closing one chapter of life and starting a new one. It’s not like you’re going to wake up on your first day of retirement and find that life has fallen neatly into place. Without a proper strategy, you risk getting financially stranded in your golden years.

Retirement strategies that work

So how do you ensure that you can retire comfortably? One very important step is to start saving early, so you can harness the power of compound interest. Patrick Chang, Chief Investment Officer, Equities of Principal Southeast Asia, says, “It doesn’t matter if you’re four years away from retirement or 40. Put away as much money as you can as soon as you can because an early start can make a huge difference in your portfolio.” The next step would be to regularly increase what you save. That might sound painful when you have rising food prices, student loans, mortgages and holiday goals to consider. To build your savings without feeling too much of a pinch, you could increase the amount you want to sock away by a small percentage every year. This strategy won’t grow your savings overnight but if you stick to it, you will eventually get to where you want to be. Whether you pick the slow-and-steady approach or a more aggressive savings strategy, the key is to be consistent. The Private Pension Administrator Malaysia’s advice is to save regularly for retirement by making it a habit. It recommends applying the dollar-cost-averaging approach, which means investing at regular intervals in the market regardless of its ups and downs. This means setting aside some money even when life throws a wrench in your plans like unexpected medical expenses or a new baby. You might have to reduce the usual amount that you’ve been saving but just keep at it, and when the situation permits, make some catch-up contributions.

Prepare for the retirement you want

You don’t need to be a financial guru to be able to take control of your finances. Start by taking stock of your retirement savings so that you have a clear picture of how much you currently have. Then evaluate your debts. Find out exactly where your money is going and how much interest you’re paying so that you can review your spending and see if you can free up some funds or downsize to cut unnecessary costs. The importance of assessing your financial standing cannot be overstated. Chang points out, “A worrying report published earlier this month highlighted that as of June 30, a total of 6.62 million members or 52% of the total of 12.78 million Employees Provident Fund (EPF) members aged under 55 had savings of less than RM10,000.” But how do you determine how much you need to retire comfortably? The EPF has set a basic savings target of RM240,000 for its members but really, there is no magic number — it all boils down to your personal needs. So, think of yourself as your own future paymaster. Compare your expenses against your expected EPF savings and other income. Then expand your savings options to cover the difference. This doesn’t mean you can’t rely on your EPF savings. Rather, it means looking at your EPF savings as one of three legs of the retirement savings stool — the other two being Private Retirement Scheme contributions and supplemented savings. All three are equally important for a solid retirement foundation. So, if you want your money to go the distance, you need to go beyond the EPF’s mandatory contribution.

A worrying report published earlier this month highlighted that as of June 30, a total of 6.62 million members or 52% of the total of 12.78 million Employees Provident Fund (EPF) members aged under 55 had savings of less than RM10,000. — Patrick Chang

Make your money work harder

Varying your investments isn’t as complicated as it may sound. If you want to give your savings a boost, why not start your retirement planning journey with Principal? Principal has an online self-serve investment platform, which gives you the opportunity to invest in unit trusts with either cash or part of your EPF savings via EPF’s i-Invest. With this portal, you can evaluate available investment opportunities, build your portfolio and manage all your transactions anytime, anywhere. Not sure which funds suit you best? Check out Principal’s website and get expert views to identify your risk tolerance and understand how you can allocate your assets to create a diverse and balanced investment portfolio. Be it conservative, mildly conservative, moderate, mildly aggressive or aggressive, Principal has funds to cater for all risk profiles. According to Chang, it is important to Principal that everyone has an equal opportunity to build financial resilience. He says, “An integral part of our company’s philosophy is to help everyone save, plan and invest for their financial security.”

Disclaimer

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