Sigma Wealth

Retirement Planning

While all of us would like to be financially comfortable in retirement, many of us do not plan effectively to achieve this goal. Taking care of present-day concerns often seems more important than planning for future needs. However, if you wish to enjoy a financially comfortable retirement, you must begin planning to do so early. The longer you wait, the harder it will be to achieve your goals.

Effective retirement planning requires the identification of specific goals and the implementation of an investment plan designed to achieve those goals. The first step is the identification of the amount of income you will require in retirement to maintain your preferred lifestyle. Most financial planning experts suggest using 70% to 80% of your pre-retirement income as a benchmark. Pre-retirement income refers to the amount of income you expect to be earning at the time you retire, not necessarily your current income. When projecting your pre-retirement income, you will need to take into consideration the effects of inflation over the years until retirement. For example, given a 3% annual rate of inflation, an individual who earns RM20,000 today would earn RM36,122 in 20 years even if he or she only receives annual cost of living raises.

While EPF may provide you with some income during retirement, it is unlikely that they will be able to wholly satisfy your retirement needs. Most individuals will need to rely on their savings and income from their investments to satisfy the majority of their retirement income needs. As such, it is essential that you develop and implement as early as possible an investment plan that is reasonably designed to achieve your retirement goals.

Thankfully, there are a variety of investment options available to help you save and invest for retirement. However, you must be familiar with these options, and the benefits they provide, if you are to take full advantage of them.