Is Your Retirement Fund Enough?
Did you know? Most Employees Provident Fund (EPF) savings will be finished after 3 years of retirement. Below is a table showing an estimate amount of EPF savings.
Category of workers*
Total savings at 55 years (MYR)
A - Factory worker that starts contributing at the age of 18 with starting salary of RM600 a month.
B - Factory worker that starts contributing at the age of 18 with starting salary of RM1000 a month.
C - Graduate that starts contributing at the age of 23 with starting salary of RM1500 a month.
D - Graduate with Master Degree that starts contributing at the age of 25 with starting salary of RM2500 a month.
E - Professionals that starts contributing at the age of 25 with starting salary of RM3000 a month.
Assumption : Contribution rate- 23 percent; Dividend Rate- 5 percent; Salary raise rate- 3 percent a year; Member contribute until 55 years old; Account is fully withdrawn.
Source: Financing challenges facing social security schemes: The experience of the Employees Provident Fund of Malaysia, Rusma Ibrahim, ms. 9
For a male factory worker B, if his living cost is RM800 per month then when he is 55 years old it will be RM 3,414.47 a month because of the Malaysian 4% a year inflation rate. So if you have RM374,112 at the age of 55 years old (already retired) and invest all the money back to get return rate of 8% a year, the money will be spend totally by the age of 66 years old when your living cost is RM 3,414.47 a month . But according to statistic Malaysian man lifespan is 70.4 years. So you will have 4 more years without money. This illustrate that EPF money is not enough to support your live after retirement.
So, additional saving other than EPF is very important for your golden years. Like Malay old folks saying, "To make ready the umbrella before the rain start". If we save a lot consistently while we are still strong to work, we don't have to work during our retirement years. We can concentrate on doing what we love and for Muslim, have more time for prayer and amassing good deeds.