EPF Isn’t Enough
One of the tragic occurrences in life is retirement. Retirement is not tragic; it is a great thing. However, the same cannot be said about the life during retirement. The carefree lifestyle that we dream of – travelling around the world and doing things that we like, free from money worries – is exactly that, just a dream. Most retirees will never get anywhere near those dreams. Not even halfway.
Why not? Because most people do not have sufficient money for retirement.
This will result in a few things: One, they have to scale back their lifestyle drastically; two, they will run short of money; three, they will have to depend on others (usually their children) for survival.
As horrifying as it sounds, the three situations above will actually happen to 95 percent of people. That means that practically everyone you meet – your neighbours, relatives, co-workers, clients, suppliers and even bosses – will not have enough money for their retirement. And worse, ‘everyone’ could very well include you.
If that does not scare you, then think about this; the ultimate prison is to be poor in old age. There is no escape and there is no second chance.
The money that we need for our retirement need to last for as long as we live. That means the money must last for at least 30 years after retirement (assuming we check out at 85). And that is a mighty long time.
The only way we are going to have enough money is to save and invest as soon as we can.
Some folks say, “I already have my EPF (Employees Provident Fund). That will take care of everything.”
Yes, our savings in EPF is good. But it is not enough. In fact, it is not even halfway enough for retirees to maintain a decent life.
A friend of mine nearly had a heart attack when I sat down with him to calculate the funds needed for his retirement. Just to maintain his current lifestyle (without touching the principal and after factoring in inflation), he needs RM6 million when he hits 55 in 2017! And that is just to maintain the basic lifestyle. I had not factored in the promised carefree life.
Now, some folks may say that amount is only for my friend. Perhaps he needs to have that much money because of a flashy lifestyle. But they live a simpler live, so they don’t need that much money.
This argument is wrong on two accounts. Firstly, this friend of mine leads a fairly simple life. And two, why downsize your life after retirement? Common sense tells us that we should be rewarded after working hard for 30 or 40 years. We should be having more, not less, money at the end. But in reality, people have much after retirement. Doesn’t sound sensible to me.
Now that I’ve scared you enough, let me share the solution with you.
We need to save for our retirement, on top of our EPF funds. The saving must start now. Today. Not tomorrow, not next week. Today.
Set aside at least 10% of your income specifically for your retirement nest egg and on top of your other savings (children’s education, buying a house or vacations). If you have to postpone buying that new Mercedes, then do so. If you have to KIV the European vacation, then KIV it. You may have to adjust your lifestyle a little but hey, this is your life we’re talking about here. We’re not talking about a cartoon character or a celluloid actor. This is your life and your future!
Once you have saved the money, you need to invest it to make it grow. This is where you have to get educated about stocks, unit trusts, properties and businesses. Read, ask, observe and more importantly, participate.
Once you have done this, then you are on track to the promised heavenly life after retirement.
Copyright © Azizi Ali 2010