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Journey to Retiring at 55: Everything You Need to Know

Why I was set on retiring at 55?

When I first started working, the official retirement age in Malaysia was 55 and hence I was focused on this target age from the beginning. The minimum retirement age has since then been amended to 60, according to the Minimum Retirement Age Act 2012 Section 4(1), which is applicable to full-time employees in the private working sector.

With the latest amended retirement age (and talks of increasing it), retiring at 55 is considered early retirement. Retirement at any age would require careful planning and financial foresight. As I share my personal retirement journey, I hope this article will empower you to commence your own journey towards retirement at whatever age you desire.

Journey to Retiring at 55 |

IMPORTANT: Do note that I am no financial expert, hence do consult with your financial consultant for any monetary decisions. I am also not a financial planner, wealth advisor, insurance agent, unit trust agent, will writing agent or anything of the like. All opinions are solely my own based on my own retirement journey. The information is not to be construed as investment advice and/or the provision of financial planning services. I cannot be held liable and/or responsible for any loss as a result of reliance on the information presented.

Setting Financial Goals

Calculating Your Retirement Needs

One crucial aspect of planning for early retirement is calculating your financial retirement needs. Many will rely on their personal savings and the Employee Provident Fund (EPF) for retirement income. Based on the EPF Basic Savings Quantum, every prospective retiree should have at least RM240,000 at retirement which allows them to spend RM1,000 monthly for 20 years. This is just an estimate, but everyone will have a different retirement figure which is dependent on your lifestyle, financial responsibilities, outstanding loans, etc. The OCBC Retirement Goal Calculator is a great start. There are 4-steps to the calculation. The first part is the below – getting the “magic retirement figure”. I know some people will ridicule me for the low-ball RM5,000 monthly expenses when I retire, so in my defense, this is an approximate figure. Put whatever figure you think is applicable to you. There are 4 steps in the calculation:

  1. Determining your retirement figure. You will get a figure of how much you will need when you retire.
  2. Evaluate what you currently have. This includes your cash, investment, endownment, property (to dispose when retiring or to rent), EPF current balance & monthly contribution. This will let you know whether you have a surplus or shortfall from your retirement figure.
  3. What you can do to address the shortfall or to optimise your surplus. You can choose either a disciplined manner or optimised returns (I think this is with reference to investment vehicles). If you are thinking of putting aside a specified amount per month, choose the Disciplined Manner.
  4. Suggestions based on the calculation. This is totally optional. I am not advocating this but use it as a guide in your planning.

Remember that your retirement figure is dependent on factors such as your desired lifestyle post-retirement, inflation rates, and potential healthcare expenses. Utilizing the above retirement calculator can help you establish a realistic savings goal. For a personalized consultation, I would suggest to speak to a personal financial advisor.

Establishing a Savings Plan

With early retirement in mind, it is imperative to establish a comprehensive savings plan that aligns with your financial goals. Taking into account the cost of living in Malaysia, setting aside a portion of your income regularly can help you build your retirement fund steadily. Besides putting money aside, consider utilizing tax-efficient savings options like the EPF or exploring investment opportunities such as stocks, bonds, or real estate to grow your wealth over time.

Wealth Building Strategies

Maximizing Retirement Accounts

Maximizing your retirement accounts is crucial. To take advantage of the Malaysian government’s Employee Provident Fund (EPF) scheme, consider contributing more than the mandatory 11% of your salary. If you are not a salaried worker, you can also consider voluntary contribution via i-Saraan scheme.

Smart Investment Choices for Long-Term Growth

Maximizing long-term growth through smart investment choices is vital for achieving early retirement. With numerous investment options, such as stocks, bonds, and real estate, diversifying your portfolio can help mitigate risks and maximize returns. With careful research and planning, you can build a robust investment strategy that aligns with your retirement goals. Be very careful with investment scams as well, anything that is too good to be true is most of the time not true. Always check with friends and family if in doubt. Best if you can double confirm with the actual company itself, do a background search. Finally, never be greedy as scammers are always targeting vulnerable people who are desperate and greedy. Always opt for legitimate options, if you have even a little doubt, trust your instinct.

Living a Frugal Lifestyle

Cutting Costs Without Sacrificing Quality of Life

The key to living a frugal lifestyle is to cut costs without compromising your quality of life. This involves making smart choices when it comes to spending money. Look for areas where you can save without sacrificing too much comfort or enjoyment. For example, consider cooking at home more often rather than eating out, or switching to local brands versus imported brands.

Budgeting for a Sustainable Pre-Retirement Period

An crucial aspect of preparing for retirement is budgeting effectively. By carefully tracking your expenses and income, you can ensure that you are on track to meet your financial goals. Allocate a portion of your income towards savings and investments, and prioritize paying off debts to reduce financial burdens in the long run.

With a well-balanced budget, you can build a solid financial foundation that will support your journey to early retirement. Be strategic in your spending, prioritize your financial goals, and regularly review and adjust your budget as needed to stay on track.

Preparing for the Unexpected

Building a Robust Emergency Fund

For any retirement plan, having a solid emergency fund is crucial to protect yourself from unforeseen circumstances. During the Covid period in early 2020, the lock down period lasted 2 years and it was a true testing period for many. Cost of living is also steadily rising, hence financial stability is key. Aim to save at least 6 to 12 months’ worth of living expenses in a liquid, easily accessible account like a high-yield savings account or a money market fund. This fund will provide a buffer in case of job loss, medical emergencies, or unexpected expenses, allowing you to stay on track with your retirement goals.

Insurance and Healthcare Considerations

Preparing for retirement means also preparing for potential health-related costs. Thankfully we have government healthcare services that is very affordable. If you have insurance, you can also avail private healthcare options. Assess your healthcare needs and invest in comprehensive insurance coverage to ensure you are protected in case of illness or injury. Do consider factors such as medical inflation rates and the coverage provided to be prepared for all eventualities.

Life After Retirement

Managing Your Retirement Portfolio

When you reach the milestone of retirement, your journey continues as you transition into managing your retirement portfolio. It is crucial to ensure that your investments are diversified and aligned with your risk tolerance to secure your financial future. By keeping a close eye on your portfolio and making necessary adjustments, you can enjoy a stable source of income during your retirement years.

If you are risk averse, you may want to consider let your EPF savings provide you with a fixed returns annually for your monthly expenses. If you need RM5,000 per month, you will need RM1.2 Million in your EPF account when you retire, assuming the dividen is 5%. Below is how I calculate the figure:

RM1.2 Million x 5% dividend = RM60,000 per annum
RM60,000/12 months = RM5,000 per month
Whatever sum you have in mind, you just need to work it backwards
[RM per month] x 12 months = [RM per year]/5% = Sum you need in your EPF

For the above calculation, don’t panic if you do not have that figure in EPF because you would also have other investment instruments, bonds, shares, and real estate investments. Bear in mind that if you intend to withdraw or use that sum, then it will also affect the annual dividend.

Embracing New Opportunities and Hobbies

Retirement at 55 opens up a world of possibilities for embracing new opportunities and hobbies. Whether it’s traveling the globe, taking up a new hobby, or pursuing volunteer work, this is the time to explore your passions and interests. By staying active and engaged with the community, you can nurture your well-being and lead a fulfilling life post-retirement.

Work after Retirement

If you are keen on working after retirement, you can look for possible opportunities in the employment world or venture into alternative income opportunities. Some possible opportunities that you can consider include affiliate income, building & managing content websites, Amazon Kindle, Amazon FBA, sell things on marketplaces like Etsy, Ebay, Shopee, Lazada etc, run an e-commerce store and many more. There are also recruitment agencies that specialize in recruiting retirees and seniors. Always remember that any job opportunity should never require you to pay any money or deposit – and be on the lookout for potential scams!

Kickstart your own retirement path

This article officially marks the start of my journey to retiring at 55. Proper financial planning and lifestyle adjustment, setting achievable milestones, increasing income through side hustles, saving diligently, and investing wisely in diversified portfolios are the starting point towards my retirement goals. My planning started a few years ago, and one of the key actions I took was investing in a piece of land for my retirement home. I hope my current and future sharings will help you kickstart your own path to early retirement in Malaysia.

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