Retirement Planning: How To Get Started

But a dream remains a dream if no action is taken. To make your retirement dreams a reality, you need to start planning to help bridge the gap between your wishes and your goals.

Not sure how and where to start? Follow these steps: 

1. Decide on the kind of lifestyle you want 

The ideal retirement is different for everyone. Some want to travel the world and pursue expensive hobbies. Others just want to spend time with their pets and grandchildren, and prefer simpler hobbies like gardening or knitting. 

Some choose to volunteer for a cause they’re passionate about. And some even choose to start their own business or continue working part-time for pleasure, even though they don’t really need the income.

Whether you want a glamorous, simple or work-for-fun lifestyle, your choice will determine the kind of budget you’ll need to live your retirement years comfortably.

2. Get a retirement plan

A retirement plan is basically a savings plan for your golden years, where you set aside a certain amount of money regularly to be placed in a retirement fund. Most retirement plans also include an investment component which can potentially grow your savings further.  

A retirement plan most people already have is the Employees Provident Fund (EPF), which is the national compulsory saving scheme for individuals employed in the Malaysian private sector. 

To complement the EPF, there is the Private Retirement Scheme (PRS), which is a voluntary long-term savings and investment scheme designed to help you save more for your retirement.  

You can further diversify your retirement portfolio with the EPF’s Members Investment Scheme (MIS), where you have the option of investing a certain percentage of your EPF savings in EPF-approved unit trust funds. The dividends you earn from the MIS will be channeled back into your EPF account and can only be withdrawn after you hit your retirement age. This is on top of the EPF’s guaranteed annual dividend rate of at least 2.5%.   

You can also consider a savings plan, which helps you save for your retirement while providing insurance coverage at the same time such as FWD Max Wealth that grows and maximises your wealth at the same time.

3. Start as early as possible

When it comes to saving and investing, the earlier you start, the better, as you’ll be able to take advantage of compounding to grow your retirement funds. 

Starting early also means you can afford to take on more risks with your investments, as you’ll have more time to recover from any losses, compared to an investor who starts late.

4. Don’t forget to also allocate for your emergency fund

Being retired doesn’t exempt you from unplanned bills. An emergency fund becomes even more essential during your retirement years, as any unexpected expenses can eat into your savings. This can be problematic when your income is already fixed and you can’t afford to take on more debt. 

Be sure to set aside a separate pool of cash that’s solely to be used for unplanned expenses such as home and car repairs. The general rule of thumb is to save between three to six months’ worth of your essential living costs. 

Planning for retirement is like running a marathon - you should set a steady pace and keep going. Staying focused on your goal of becoming financially independent will help you stay motivated in your journey. 

Another important thing you should do is to get yourself adequate medical protection, as healthcare becomes crucial once you retire. Check out our portfolio of medical plans you can consider here.