How To Increase The Funds In Your Retirement Savings Account

A 2023 statement by the EPF CEO reveals that only 18% of account holders will have RM1,000 a month for 20 years post-retirement. After 4 EPF special withdrawal schemes during the Covid-19 pandemic, many people are quite worried about their financial situation, especially those nearing retirement age. As early as February 2021, the EPF reported that about 30% of members had nearly depleted their retirement funds in Account 1, which is typically not withdrawable before age 55. This has created a potential “retirement time bomb” in Malaysia.

This retirement financial crisis demands new strategies and methods to increase our retirement savings. While you may not be able to rely solely on EPF withdrawals for a comfortable retirement, there are many effective financial tips to secure a better future for you and your family.

Think long-term financial goals

If you want to grow your retirement savings in preparation for retirement, you need to set financial goals and a clear action plan. For example, you may have a goal to buy your own retirement home at the age of 55 - this may require saving more than you currently are such as making regular self-contributions to the account to help achieve your retirement dreams.

You are advised to conduct a thorough analysis of your needs and aspirations. This includes considering the cost of living, lifestyle changes and potential medical expenses. Don't forget to factor in the current inflation rate when considering the financial goals. You can use online tools such as an inflation calculator when calculating future retirement costs.

Start investing early

Invest early to grow savings over time through the power of compounding returns. Photo by Towfiqu barbhuiya: https://www.pexels.com/photo/close-up-shot-of-a-person-holding-a-jar-with-coins-9755383/

Investing from an early age is a crucial step that can build wealth and increase funds in your retirement savings account. It provides a major advantage known as the "time factor" - the longer you invest, the more time your money has to grow through the power of compounding returns.

The choice of investments is also crucial - choose stable financial instruments that can guarantee consistent growth of your savings account. Some low risk, stable return investments in Malaysia include government bonds, corporate bonds, fixed deposits and of course, EPF.

Many financial instruments can be profitable - regardless of whether your investment amount is small, moderate, or large. The key is to be disciplined and consistent.

Consistency is the key to success

Ever heard of "dollar-cost averaging"? It refers to regular, weekly, or monthly investments in small amounts. Consistent investments like this generally reduce your exposure to negative market factors because the investment amount used is relatively small.

The concept relies mainly on the time factor. The benefits of such investment activities will be more significant if you invest over a long time such as 3 years and above. That's the advantage of investing from a young age.

Smart financial planning and management through monthly plans

Planning and managing your savings accounts wisely involve disciplined budgeting. Plan your expenses and stick to your plan as much as possible.

Unplanned withdrawals can derail your progress and reduce the overall amount of savings, especially those involving debt. So, avoid unnecessary withdrawals and strive to maintain strong financial discipline.

The role of EPF special withdrawal in your retirement

Normally, you are not allowed to withdraw from your EPF account except for specific reasons. Under the EPF Special Withdrawal programme, contributors are allowed to withdraw a certain amount from their Account Two for purposes such as children's education or medical emergencies. However, these withdrawals need to be carefully planned to avoid depletion of your retirement savings.

Yes, you can use EPF withdrawals to add to other savings and investments accounts, but it is not encouraged as it still comes with its risk and also considering that the EPF guarantees a minimum dividend of 2.5% a year. Furthermore, EPF has in the past few years has consistently offered higher returns than a regular savings account.

The importance of insurance plans in retirement planning

Managing your retirement savings account gives you control and autonomy to build a secure and comfortable future. To achieve your dream retirement, start saving and investing today – build a profile that fits your financial aspirations, be consistent and be disciplined. However, all of that hard work may be derailed by unexpected events. That is why being insured is so important. One such event is medical emergencies. According to a recent report, yearly medical costs in Malaysia are rising by 14.2% on average. We may not be able to foresee the future but we can be financially protected against medical emergencies.

With FWD Medi First, get up to RM5 million annual limit and unlimited lifetime medical cover. Learn more about the medical plan that also protects your future needs here.