Want to plan your finances to have enough for retirement in Malaysia? Here are some tips

KUALA LUMPUR, Oct 27 — As Malaysians' life expectancy rises, the pressing question becomes whether they are financially prepared for retirement. According to the latest official figures, people born in 2026 are expected to live to 75.5, while those aged 60 and 65 can expect to live to 80.2 and 81.5, respectively. Licensed financial planner Rajen Devadason warns that people must plan for a much longer life, asking "But what are you going to do if you live to be 85, 90, 95, 100, 105?"

Rajen suggests splitting net income (after taxes) into three equal portions: past, present, and future. One should commit to paying off debts, covering current expenses, and investing for the future. He advises contributing an additional 22% to passive income sources like bank interest, EPF savings, dividend-paying stocks, rental income, REITs, and REIT funds.

Rajen emphasizes the importance of creating a written budget, increasing active income, controlling expenses, and allocating surplus for passive income. He warns that delaying gratification now could lead to stress in retirement due to inflation, living expenses, emergencies, medical costs, or vacations. Delaying gratification and building passive income can help reduce this stress.

He also recommends building cognitive reserves to stay mentally sharp, as the longevity risk is the risk of living longer than one's money lasts. Malaysians should work past the retirement age if necessary to hit retirement income goals. Rajen proposes gradually raising Malaysia's retirement age to 65 by 2035 and 70 by 2050. He suggests setting a retirement goal and working backwards to determine how much one needs to save and invest.

EPF's Retirement Income Adequacy framework outlines savings targets for different levels of financial security. If unsure where to start, one can visit their nearest EPF branch for free financial planning and retirement planning advice.