EPF Malaysia says RM600,000 needed to retire comfortably

How much funds do we need to retire comfortably?

Many years ago, a good friend said that she would need RM2 million to retire not-so-comfortably. Currently she stays in a semi-detached home in a gated and guarded community. Just for perspective, the table which she is using as a desk for working from home costs RM5,000. I am very sure the table is a great asset to have and yes, it tells a lot about her financial status too. I also do not think there are so many Malaysians who would think the same and that RM2 million is needed in order to retire comfortably.

What is EPF’s advice then?

That’s many years ago, probably she would have changed the retirement fund aspiration higher. Well, the Employees Provident Fund (EPF) says that Malaysians should have at least RM600,000 in order to retire comfortably in major cities. I read through their chief strategy officer Nurhisham Hussein’s comments and I believe this amount already includes the amount needed for shelter; a roof over our head even if we do not own a property.

How much is RM600,000 anyway?

Well, if our life expectancy is 80 and we retire at 60, then that’s another 20 years or 240 months. RM600,000 divided by 240 months is RM2,500 per month. If we are paying RM1,000 for rental, then we have RM1,500 per month for food and other stuffs. That’s RM50 per day. Okay, if we cook by ourselves and manage the expenses, RM50 per day is still pretty manageable.

Now, think a little. What if we own a property which we could stay without paying monthly repayments? Perhaps this RM600,000 can be lowered? At the same time, if we spend well above what we have, then perhaps even RM600,000 is not enough yeah. So, how much is enough then?

Here’s that article in thesundaily (click here to read the full article)

EPF chief strategy officer Nurhisham Hussein said: “Based on our data, an individual retiring in Kuala Lumpur today will need to set aside RM2,450 a month for basic necessities. Based on this and figures from the Statistics Department, which state the lifespan of the average Malaysian is now 80 years, it means a person will need RM600,000 to retire.”

He also gave an example of location versus the funds needed. He said, “For example, if a person were to retire in Alor Star today, he or she will need RM1,980 per month based on purchasing the same basic necessities (as a person retiring in Kuala Lumpur).”

In terms of investment, this is what he said, “Don’t put all your eggs in one basket. There are several options available for Malaysians, such as putting money in verified unit trusts and financial institutions.” He added that Malaysians can start contributing to EPF from as young as 14 years old for their children. This can help parents to kick-start their contributions.” Please do read here: (click here to read the full article)

If we do not own a property

In many countries, the cost of living is elevated because of property price. Actually, when we look at what we spend every month, we spend a lot on shelter. If it’s a small room, it could be RM700 (without the need to share) or it could be RM2,000 for a typical apartment per month. We may spend RM50 for food per day and this is still lower than the rental we pay for a typical apartment per month. If we do not own a place, we are also at the mercy of homeowners yeah. If they know we do not have much choice, what’s there to stop them from increasing the rental every year?

If we own a property, a small one maybe?

If we retire at 60 and we continue our life journey until 80, that’s 20 years. If we own a property which is fully paid for when we retire, even if it’s a small one, we could probably save RM2,000 per month. That’s RM2,000 per month for 20 years. In calculation it is as follows:

RM2,000 x 12 x 20 years = RM480,000.

I am not sure about you but I do think it’s best to buy a small place and just do best to keep paying for them so that by the time we retire, the home is fully paid for.

Happy owning at the very least one small property.

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