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Every Middle Class Earner Destined For Decent Retirement

With all the talk revolving around the EPF withdrawal age lately, the topic of the best retirement plan in Malaysia seems to be on the tip of everybody’s tongue

In essence, people are worried about retirement. The HSBC’s Future of Retirement, A Balancing Act survey showed that more than two thirds of working aged people are concerned about running out of money during retirement.

Adding to that are troubling statistics released by the Randstad Workmonitor Q1 2015 survey which show that 82% of employees in Malaysia expect to retire between the ages of 60-65 – well above the retirement age.

These reports all point towards one undeniable reality, that is, the middle class think that they do not earn or have enough to save for their retirement.

To echo this point, the EPF 2014 Annual Report shows that the majority of savings accumulated in the EPF fund by the age of 54 is less than RM50,000 – hardly enough to live comfortably for a couple of years. By the age of withdrawal, many Malaysians would find their funds depleted, due to the many qualified withdrawals they have made beforehand.

As doleful as these numbers look I have very strong, compelling reasons to believe that every middle class is destined to achieve financial freedom.

Contrary to what has already been said, the middle class, especially those who benefit from a dual income earning household, should be more than capable of building up sufficient funds for retirement. The shocking truth is that they don’t even have to take a lot of risks to achieve it.

The answer lies in how they optimise what they’ve got. It is those who start realising this potential whom achieve their financial goals.

Whether or not you choose to act on it will set you apart as either financially free, or as being part of the statistics of those who struggle financially past retirement.

It sounds relatively easy, doesn’t it?  But the reality is that the middle class, whether knowingly or unknowingly, have a tendency to squander away their hard-earned assets over small, almost unfathomable money mistakes.

These mistakes may come in the form of leaving be an under-performing unit trust fund or loss-making shares. Or it could be failing to utilise their EPF money to invest into higher yield investments, or neglecting to invest even any idle cash due to a demanding work schedule. Perhaps they have paid their mortgage loan with an inappropriate strategy, Or it could be that they bought the wrong type of insurance or have been paying too high a sales charge on their investments. The list goes on and on.

Ask yourself this: Are you and/or your spouse guilty of the above “small money” mistakes?

None of the ‘mistakes’ shown here is in itself disastrous. However, from over 15 years of being in financial advisory, our experience tells us that their combined and compounding effect will cost the average middle class Malaysian a staggering loss of RM 1.5 million to RM 3 million, thus robbing them of their financial freedom.

You may wonder how these mistakes get compounded into such a large amount. In the following example, I will illustrate monetary loss of just one common mistake – not optimising the returns on savings.

Let’s say you invest RM 2,000 per month in a fixed deposit account for 20 years.  At a rate of 3% interest p.a., it should give you returns of RM 656,603.

On the other hand, if you had invested the amount at an average rate of return of 8% p.a., you would have gotten returns of RM 1,178,040.

Compare the 2 actions above. Which would give you a better result?

Keeping the money in a fixed deposit account, or in other words, failing to optimise your money would have lost you out on the opportunity to make an additional RM 521,437 in returns.

The outcome is more drastic for those who put their money into a savings account, which gets only 1-2% p.a.

The thing is, the seeds of this financial mishap are planted years before their outcome. The middle class have a tendency to make unnecessary mistakes (in the broad categories of either taking too much risk or doing nothing to grow their wealth) which derails them from their rightful financial destiny. The mistakes are often small and may not even look like mistakes at the time – many do not even realise that they are making them.

The great investor, Warren Buffet once said, “Risk comes from not knowing what you’re doing.”  

Once you know the real cause of poor retirement funding, you can then take the right action to address it.

First things first, find out how you can optimise your money and avoid making unnecessary money mistakes which may cause your assets to deplete. Then and only then will you be able to regain and prevent the unnecessary loss of the RM1.5- RM 3 million. By doing so, you will get yourself back on track towards your journey of securing a comfortable retirement.

The key is to recognise that you are the master of your own destiny. The choices and decisions that you make in life today will determine if you would suffer or prosper from that decision in the near future.

If you want to do well, know that this responsibility is entirely up to you.

The best retirement plan in Malaysia may seem like a mind-boggling topic, simply because it is difficult to foresee what our future holds, and how much we will be making or needing 20 years from now. But don’t let that stop you.

For those who have neglected to do so in the past, I say better late than never. Start putting a plan in motion right away so that when the time comes, you can enjoy your golden years with a lifestyle that you deserve.

Best Retirement Plan Malaysia



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