When one starts working, retirement may seem like a distant future, however, it is important to know that it is never too early to begin planning for your retirement.

Time is Key to Investment

Many people mistakenly believe they have plenty of time for retirement planning, therefore they procrastinate on it; when they are 20 years old, they think retirement is about 40 years off, so they wait until they are 30. And the same goes when they reach 30, 40 and so on.

Sadly, instead of beginning savings early, they spend so much paying off mortgages and debts when suddenly, they realise that much time has been lost and their retirement savings is forever scarred.

“Procrastination is the thief of time”, English poet Edward Young once said. The most valuable asset unit holders have when saving for retirement is TIME. The more time they have until retirement, the lesser the burden is to accomplish their retirement goals. The more they delay getting started, the harder it will be and the greater the risk to achieve their intended retirement lifestyle.

Managing and Growing Your Investment Portfolio

Some people however do start investing early, but they then let their portfolio go into “sleep-mode”. Over time, as changes in personal needs, spending or financial goals occur, adjustments in their investment portfolio should be done.

For instance, when you start working, you could begin with roughly knowing the age at which you want to retire and how much money you would need to do that. By looking at your present savings, you can understand how much you would need to save and invest for your retirement.

Subsequently, when in your late 30s, you would most probably have a better idea of where you stand financially. With retirement years creeping closer, it will be a good time to start shifting your investments to more stable and safer areas, where capital preservation precedes growth.

While investing, it is important to utilise Direct Debit Authorisation (DDA) facilities to make regular and disciplined investments. This method will allow you to habitually save and not feel the burden of setting aside sums for your golden years. Also, remember to diversify your investment portfolio – as the saying goes “don’t put all your eggs into one basket”. Spread your investment over selected domestic and regional equity funds as well as fixed income funds. This is to ensure that your savings grow while mitigating the risk of market volatility.

The Longer We Live, the More Money We Need

With the life expectancy of Malaysians having risen to 74.8 years on average, Malaysians can look forward to more than a decade of post-retirement life (assuming retirement age of 60). This is not taking into account the many individuals who look forward to retiring early.

To retire is to relief yourself of your ability to bring home salary, which you use to fund your many expenses ranging from property, transport, food, medication and so on. This is also when you expect to use your savings. However, the effects of inflation that will shrink the value of the ringgit over time, will inadvertently also shrink your retirement savings.

This can be countered if you allow your money to grow at a rate higher than inflation.

Retirement Planning with Unit Trust and Private Retirement Scheme (PRS) Investments

Unit trust funds are professionally managed by fund managers who manage the risks and returns of your investments. PRS, which was introduced in 2012, is especially catered to supplement the compulsory Employee Provident Fund (EPF).

As general rule of thumb, you will need 100% of your current annual expenses plus inflation for your Retirement Fund. This is because, although some expenses may decrease when you retire, some will also increase. Therefore, both expenses will offset each other. This expenses approach for planning your retirement savings takes into account the inevitable inflation, which will eventually decrease the value of your savings.

To know how much to save for your retirement, you can use our Retirement Calculator available in Public Mutual website (www.publicmutual.com.my). The analysis will provide you with options of lump sum or monthly investment to kick-start your Retirement Savings.

This article is prepared solely for educational and awareness purposes and should not be construed as an offer or a solicitation of an offer to purchase or subscribe to products offered by Public Mutual. No representation or warranty is made by Public Mutual, nor is there acceptance of any responsibility or liability as to the accuracy, completeness or correctness of the information contained herein.