“Retirement is like a long vacation in Las Vegas. The goal is to enjoy it the fullest, but not so fully that you run out of money.” – Jonathan Clements
The amount of money needed for a comfortable retirement is a subject of much debate and varies significantly based on individual circumstances, lifestyle expectations, and location. A recent survey conducted by HSBC, as part of their Quality of Life Report 2024, sheds light on the retirement savings goals of affluent individuals in Malaysia and other countries in the region.
How much do you need?
The survey revealed that affluent Malaysians, defined as those with investable assets between US$100,000 and US$2 million, believe they need an average of US$830,000 (approximately RM3.61 million) to retire comfortably. This figure is notably lower than the perceived retirement needs of individuals in Hong Kong (US$1.08 million) and Singapore (US$980,000).
However, it is considerably higher than the average retirement savings goals reported in India (US$390,000) and Indonesia (US$340,000). The report surveyed over 11,000 affluent individuals across 11 markets, providing a broad perspective on retirement planning trends in the region.
I think it is understandable that you need more money to live in Singapore than Malaysia and I doubt whether you can live comfortably after retirement with USD980k ( SGD1.3 Mil).
Is US$830,000 a Realistic Retirement Goal for Malaysians?
While the HSBC survey provides valuable insights, it’s crucial to consider the specific context of Malaysia. Factors such as the cost of living, inflation rates, healthcare expenses, and expected lifespan play a significant role in determining the actual amount needed for retirement.
Although Malaysia generally has a lower cost of living compared to some of its neighbors, expenses in major cities like Kuala Lumpur can be substantial. Besides that the impact of inflation on the purchasing power of retirement savings cannot be ignored. It’s essential to factor in the potential erosion of wealth over time.
The rising cost of healthcare is a growing concern for everyone, including doctors. Recent news of a 40-70% increase in insurance premiums is alarming, but not entirely unexpected considering the high charges imposed by private hospitals. As medical technology advances and the population ages, healthcare expenses are inevitably on the rise.
With increasing life expectancy, Malaysians need to plan for a longer retirement period, which may require a larger nest egg. With the continuous advancement in healthcare and living standards, Malaysians are experiencing a steady increase in life expectancy. This positive development, however, brings forth a crucial financial implication: the need to plan for a significantly longer retirement period.
How to save enough money for retirement?
Achieving a retirement goal of US$830,000 or any other desired amount requires careful financial planning and consistent investment. I would suggest you to start as early as possible. For me, I opened EPF/KWSP accounts for them when they were 14 years old. I put money into their accounts every quarter and asked them to invest all their Chinese New Year angpow money into their EPF accounts.
The power of compounding works best when investments have a longer time horizon. Starting early allows for greater wealth accumulation. For Singaporeans, a CPF account can be created at birth, so as a Singaporean, you have even a longer time horizon. I talked about EPF/CPF millionaire HERE.
And of course, a diversified investment portfolio helps manage risk and potentially enhances returns. I recommend all Malaysians to invest in a diversified world index fund ( such as VWRD or IWDA) besides their EPF. And remember be persistent and patient, you must be consistent in your contributions to your retirement accounts! Even the amounts are small, they can add up significantly over time.
Beyond the Numbers
While financial preparedness is undoubtedly crucial, retirement planning goes beyond just accumulating wealth. It’s also about ensuring a fulfilling and meaningful lifestyle during the golden years. Factors such as health, social connections, and personal interests play a vital role in overall well-being during retirement.
Many people invest with the goal of seeing their account balances grow. While it’s satisfying to watch those numbers climb, I believe that the true power of investing lies in the freedom it can provide.
We all have a limited amount of time on this earth. By investing regularly, we’re essentially using our money to buy back our time in the future. This means having the freedom to choose how we spend our days, whether it’s pursuing passions, spending time with loved ones, or simply enjoying a slower pace of life. Time is the ultimate currency!
Conclusion
The HSBC Quality of Life Report 2024 provides a valuable benchmark for retirement savings goals in Malaysia. However, it’s crucial to personalize these figures based on individual circumstances and aspirations. By adopting a proactive approach to financial planning and investing wisely, Malaysians can work towards achieving a comfortable and secure retirement. Remember, retirement planning is a journey, not a destination. It’s about making informed decisions today to secure a brighter tomorrow.
